Bank of Japan Says Its Role As A Financial Intermediary Threatened By Cryptocurrencies

A deputy governor of the Bank of Japan has admitted that the role of the bank as a financial intermediary would be greatly reduced if cryptocurrencies replace cash and deposits.

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A deputy governor of the Bank of Japan has admitted that the role of the bank as a financial intermediary would be greatly reduced if cryptocurrencies replace cash and deposits.

However, the governor says he believes that cryptocurrencies for transactions are unlikely to happen, at least in the near future.

Cryptocurrencies still face some challenge to widespread adoption

Masayoshi Amamiya, a deputy governor of the Bank of Japan, is of the view that even though cryptocurrencies have come a long way, there are still some obstacles that need to be surpassed before they can gain widespread adoption.

While delivering a speech at the autumn annual meeting of the Japan Society of Monetary Economics, Amamiya stated that there are still doubts over cryptocurrencies abilities to improve the current financial landscape.

He stated that there are still several aspects to be looked into to ensure that cryptocurrencies can contribute to the improvement of financial policies of financial stability.

He, however, noted that if cryptocurrencies replace cash and deposits, then the role of central banks as financial intermediaries would be greatly reduced. This is because cryptocurrencies would have an impact on BOJ’s ability to spearhead the economy, given their decentralization.

Amamiya is of the view that there are still be barriers that are stopping cryptocurrencies from gaining widespread adoption. The main problem according to him is popularizing cryptocurrencies as a payment system.

CBDCs are not an effective economic tool

Even though central bank-issued digital currencies (CBDCs) are gaining widespread traction all over the world, Amamiya has negative sentiments towards them.

He expressed doubts regarding the functions of CBDCs as he believes those type of cryptocurrencies would not make the existing monetary systems better.

Due to these reasons, he stated that the Bank of Japan will not be issuing its digital currencies at the moment.

His point is contrary to what most financial experts believe as they view CBDCs as tools that would allow central banks to be in control of the economy if interest rates fall to zero.

He stated that charging interest on central bank-issued currencies would not be a good option unless central banks eliminate fiat currencies from the financial system, a move he doesn’t see happening in the nearest future.

If fiat currencies are still in existence, then the citizens would continue to convert cryptocurrencies into cash so that they can avoid paying interest on them.

He pointed out that eliminating cash in Japan is not an option since it is still a very popular means of payment.

Back in April, Amamiya expressed similar skeptical views on CBDCs, claiming that they would have a negative impact on the economy and the current financial landscape. He, however, stated that the BOJ is still monitoring some emerging Fintech such as crypto.

Japan continues to be one of the leading cryptocurrency nations in the world despite the high profile hacks that have taken place this year.

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