Bank of Japan official calls for G7 nations to adopt common crypto regulations

April 1, 2022 Coin Telegraph

The Bank of Japan has warned G7 nations that a common regulatory framework for cryptocurrencies needs to be introduced quickly, as current rules do not take into account the potential for digital assets to be used to skirt sanctions.

A senior official from the Bank of Japan (BOJ) has warned G7 nations that a common framework for regulating digital currencies needs to be put in place as quickly as possible.

G7 refers to the Group of Seven, an inter-governmental political forum made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

The statement comes in response to the continued conflict between Russia and Ukraine, as cryptocurrencies and their potential applications for skirting economic sanctions falls under increasing scrutiny.

The head of the BOJ's payment systems department, Kazushige Kamiyama, told Reuters that using stablecoins makes it very easy to “create an individual global settlement system,” which would in turn make it easier for nation states to evade more traditional and regulated payment systems that use the U.S. dollar, euro or yen for settlement.

Kamiyama added that a sense of urgency is paramount if the G7 nations are to effectively coordinate to regulate cryptocurrencies and digital assets, as the current regulations do not fully consider their growing adoption and proliferation throughout the world.

Kamiyama added that this regulatory framework would affect the design process of Japan’s own central bank digital currency (CBDC) — the digital Yen. There would be a need to carefully balance individual privacy with concerns about money laundering and other white collar crimes.

The governor of the BOJ, Haruhiko Kuroda, announced at Japan’s FIN/SUM fintech summit on March 29 that it has no plans to introduce a CBDC anytime soon. Kuroda explained that the BOJ plans to carefully consider the expected roles of central bank money in the lives of Japanese citizens.

“We consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems.”

Kuroda’s remarks come just four days after the BOJ announced that it is moving onto phase two of testing the viability of a Japanese CBDC. Phase two is set to begin this month, so any new regulations decided upon by the G7 will have some impact on this process.

Kuroda said that a decision on whether to issue CBDC in Japan will most likely be reached sometime in 2026, depending on the speed at which CBDC adoption occurs throughout the rest of the world.

‘No Plan to Issue CBDC’ — Bank of Japan Governor

March 31, 2022 Bitcoin.com

Former BOJ official warns against use of digital yen in the financial sector

January 31, 2022 Coin Telegraph

Bank of Japan

Hiromi Yamaoka is currently heading a private forum of 74 companies that is planning to launch a private digital currency.

A former Bank of Japan (BOJ) official who reportedly headed the digital currency research is now advising against its use.

According to a report published in the Japan Times, Hiromi Yamaoka, the former head of the BOJ’s financial settlement department, advised against using the digital yen as a part of the country's monetary policy.

Yamaoka’s biggest concern lies with the negative interest rates and believes once the digital yen becomes a prominent tool for mass payments, the common public would have to bear the brunt of the depleting value of the fiat currency. He went on to warn that the digital yen could pose a risk to financial stability and could have disastrous outcomes for the economy.

Yamaoka is currently working in the private sector, chairing a forum of 74 firms that include some of the biggest banks in the country. The forum is currently working on launching a private digital currency as early as April this year.

In October 2020, the BOJ shared a three-phase trial outline for its central bank digital currency (CBDC). The first two phases of the trial are focused on testing the proofs-of-concept while the third phase would see a pilot. The first phase started in April 2021 and is expected to finish by March this year. The BOJ is expected to start the second phase of the trials later this year that would test the technical aspects around the issuance of the digital yen.

Despite being one of the first nations to introduce crypto regulations, cash is still a king in the Japanese retail sector owing to natural calamities which often cut off power in the country. Thus, the payment sector in the country is more focused on executing offline transactions. In July 2020, the central bank published a research report focusing on developing an offline CBDC.

BOJ Governor Haruhiko Kuroda said in a statement on Friday that they are not looking for an immediate launch. He also noted that a digital yen could launch by 2026 and the decision won’t be made by the central bank alone.

Japan’s financial regulators may propose legislation in 2022 restricting stablecoin issuance

December 6, 2021 Coin Telegraph

Bank of Japan

The move comes as the Bank of Japan wants to roll out a digital yen CBDC by the end of next year.

According to The Nihon Keizai Shimbun (Nikkei), one of the world's largest financial newspapers and the entity behind the Nikkei 225 stock index, Japan's Financial Services Agency, or FSA, will propose legislation next year restricting stablecoin issuance to only bank and wire transfer companies. Theoretically, this would prevent entities such as Tether (USDT), which does not operate as a bank and is only regulated in the British Virgin Islands, from conducting business with Japanese customers.

However, the new proposed rules would only affect some stablecoin issuers. For example, USD Coin (USDC) issuer Circle plans to become a crypto bank chartered in the United States amid a regulatory crackdown. While operating as private companies alone, stablecoin issuers are typically exempt from financial reporting, auditing or regulatory oversight, leading to notable speculative claims that Tether may not have enough reserves to back USDT.

In addition, the FSA also plans to toughen regulations in areas such as preventing transfers of criminal proceeds, verifying user identities and reporting suspicious transactions for both stablecoin issuers and wallet providers.

Private stablecoins, however innovative, compete directly with central bank digital currencies, or CBDCs, and their adoption. In Japan, the central bank plans to roll out the digital yen, dubbed the 'DCJPY,' by the end of next year. It is supported by a consortium of nearly 70 companies, including the country's largest financial institutions, which have all joined in on a trial of the DCJPY. There is currently a stablecoin digital yen in circulation, called the 'GYEN", and another pending launch backed by Circle.

Japanese megabanks join consortium launching yen-based digital currency

November 24, 2021 Coin Telegraph

Bank of Japan

Private-sector behemoths in Japan are exploring digital currencies as a way to streamline large fund transfers and settlements.

A consortium of roughly 70 Japanese companies, including the country’s biggest financial institutions, have joined forces to trial and launch a new yen-based digital currency in fiscal 2022, sending a strong signal that the private sector was embracing blockchain-based payment systems.

The new digital currency, dubbed “DCJPY,” will be backstopped by bank deposits and rely on a common platform to expedite large fund transfers and settlements among the participating companies, according to Kazuhiro Tokia, the chief executive of cryptocurrency exchange DeCurret.

DeCurret is leading the consortium, which includes banks Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group. The consortium also consists of Japan Post Bank Co Ltd., Nippon Telegraph and Telephone Corp, East Japan Railway Co and Kansai Electric Power Co Inc. According to Reuters, the group has been meeting regularly since 2020 to discuss creating a new settlement platform for digital payments.

In terms of total deposits, Mitsubishi, Mizuho, Sumitomo and Japan Post Bank are among Japan’s five largest financial institutions.

Within the public sector, the Bank of Japan has prioritized the development of a central bank digital currency, or CBDC, with a focus on providing seamless payment channels between the so-called digital yuan and electronic payment services. While the BOJ is spearheading this effort, the end goal is to incentivize private-sector uptake of a CBDC. As Cointelegraph reported, the Bank of Japan’s CBDC pilot tests are expected to be completed by March 2022.

The deposit-backed infrastructure being developed by the consortium aligns with the BOJ’s CBDC framework, according to DeCurret adviser Toshihide Endo, who previously served as head of Japan’s Financial Services Agency.

Asian CBDC projects: What are they doing now?

October 16, 2021 Coin Telegraph

Asia

Governments in Asia are quickly researching or implementing CBDCs. What does this mean for the region’s overdependence on the U.S. dollar?

The rapid growth of mainstream attention toward cryptocurrencies has forced the hands of numerous governments to create their digital alternatives. Over the past few years, interest from various jurisdictions has been pointed towards central bank digital currencies (CBDCs) — digital versions of government-issued fiat.

Given their capacity to use blockchain technology to facilitate a simplified fiscal policy — not to mention calibrate privacy features and even provide cross-border banking services to the unbanked — CBDCs continue to gain even more attention from various governments worldwide.

Already, surveys show more than 80% of central banks are researching CBDCs, with some working on proofs of concept that could eventually lead to the introduction of fully functional CBDCs. Out of the surveyed central banks, 10% plan to offer a retail version of a CBDC in the next three years, with another 20% set to make the move in under six years.

In Asia, these efforts have been compounded by China’s release of the world’s first CBDC after setting up a task force as early as 2014. By 2016, the People’s Bank of China (PBoC) had already established a Digital Currency Institute, which developed a prototype CBDC.

Major Asian banks have shown great interest in CBDCs as reports show collaborative efforts by Thailand’s, Hong Kong’s and China’s central banks to create a digital ledger technology (DLT) for a CBDC prototype designed to bridge cross-border gaps.

In this article, we give you a brief look at some developing CBDC projects on the Asian continent.

China

China ranks among the world’s top economies to embrace digital currencies with the release of the digital yuan — a CBDC project issued by the PBoC.

Dubbed the Digital Currency Electronic Payment (DCEP) China’s digital yuan (e-CNY) is set to completely replace cash payments and has been rolled out in the country’s major cities since April 2020.

China’s DCEP, while sporting some anonymity features, is controlled, tracked and registered on smartphone apps by the Chinese government, giving them the ability to freeze accounts at will.

Perhaps one of its advantages is the fact that users on China’s DCEP network can reverse or correct erroneous transactions, which is one of the features that is non-existent on decentralized digital currencies like Bitcoin (BTC).

As China’s CBDC takes shape, various countries (especially the United States) have grown increasingly concerned that the new CBDC initiative will help China tighten increased surveillance on its citizens and private companies.

The move is also seen as an attempt to supplant the dominance the U.S. dollar enjoys in international trade. Even so, China’s e-CNY remains highly localized with no significant attempts by the Asian nation to take its CBDC international.

Hong Kong

Just recently, the Hong Kong Monetary Authority (HKMA) released a white paper discussing plans to experiment on the benefits of retail CBDCs for the city’s cross-border markets.

Hong Kong is now governed under a one-country, two-system framework where it maintains its own financial and judicial system separate from mainland China. However, HKMA is working with China’s central bank to explore the infrastructure development of its digital Hong Kong dollar (e-HKD).

According to the white paper, “The architecture proposed in Hong Kong’s e-HKD features a flexible and efficient two-tier distribution model of a CBDC that enabled privacy-preserving transactions, traceability and cross-border synchronizations of ledgers.”

The white paper is the result of CBDC research by Hong Kong’s major financial authority that has been ongoing since 2017 under the aegis of “Project LionRock.” The HKMA considered the opinions of academic and industry experts and plans to conduct more trials to ensure the readiness of both a retail and wholesale CBDC.

South Korea

South Korea’s latest move towards a CBDC has seen the Bank of Korea (BoK) make calls for a technology partner to help pilot a CBDC program set to run till the end of the year.

In a report published by BoK in February this year, the central bank announced plans to test and distribute a digital won while outlining the legal challenges that accompany a state-issued digital currency.

Apart from selecting a technology partner to help with the project, BoK has also announced that its CBDC will first operate in a limited test environment in order to analyze the functionality and security of the CBDC.

According to previous remarks by a BoK official, South Korea’s cash transactions are on the decline, and the central bank is only taking steps in preparation “for the expected changes in payment settlement systems [worldwide].”

The Philippines

In the summer of 2020, the central bank began to consider the creation of a CBDC by forming a committee task force to study the issue.

Bangko Sentral ng Pilipinas had confirmed in a virtual briefing that a committee was set up to look into CBDCs. In the briefing, Governor Benjamin Diokno explained that a feasibility test and an evaluation of the policy mechanisms of issuing a CBDC were underway.

Like most governments and traditional financial institutions, the officials in the Philippine government were not shy to admit to the significance of blockchain technology. Diokno said, “Cryptocurrency for us has always been beyond the asset itself but more on the blockchain technology that underpins it.”

In line with these remarks, the Philippine Bureau of the Treasury, in partnership with the Philippines’ Digital Asset Exchange and UnionBank, had launched a mobile application built on blockchain tech for distributing government-issued treasury bonds.

A few months later, however, saw the Philippines’ central bank reject the possibility of issuing a CBDC any time soon. Citing the need for ongoing research and study, the country’s central bank noted that its CBDC research so far could benefit from looking at established use cases of digital currencies in the private sector as well as other industrial applications.

Singapore

From as early as 2016, the Monetary Authority of Singapore had been looking into CBDC initiatives and is now seeking commercial partners to help develop the currency.

By setting up challenges and competitions to discover and develop a retail CBDC, Singapore was able to establish a healthy diversity of solutions with the participation of more than 300 individuals.

Singapore’s move to launch a CBDC began as a joint project with an institute dubbed “Project Dunbar” that mainly focused on building an in-house retail CBDC for the country.

Soon after, the Singaporean central bank announced cash prizes for participants issuing digital currency ideas. Finalists in the challenge included ANZ Banking Group, Standard Chartered Bank, Criteo, Soramitsu and HSB Bank Limited, to mention a few.

Throughout 2021, the Singaporean authorities have maintained a crypto-friendly stance with approvals given to crypto exchange platforms to operate similar to other digital payment token services.

Cambodia

Cambodia's “Project Bakong” is probably one of the few fully operational retail CBDCs out there. The country’s blockchain-enabled money transfer project was originally launched in October 2020.

By June 2021, the project was reported to have amassed over 200,000 users with an overall indirect outreach of over five million users. What’s more, the first half of 2021 saw Cambodia’s CBDC project hit a transactional throughput of 1.4 million transactions valued at $500 million.

Developed on a hyper ledger platform, the Cambodian CBDC features mobile connectivity that allows users to connect to financial institutions and make payments without a centralized clearing entity.

Apart from the declared goal of using the CBDC to wean off dependence on the U.S. dollar, officials also disclosed that plans are underway to explore a cross-border transaction capability through a partnership with Thailand’s central bank and Malaysia’s largest bank.

Japan

In Japan, the country’s central bank joined hands with a group of other seven central banks in October 2020 to publish a report that examined CBDCs.

Since then, the Bank of Japan (BoJ) has begun a proof-of-concept to test the core CBDC functions. While the testing phase was scheduled to end by March this year, officials from Japan’s panel on digital currencies have said that the digital yen should be compatible with other CBDCs and that the BoJ is still ironing out its key functions.

An offline capability of the CBDC is one of Japan’s core considerations as it strives to establish a digital currency that is resilient to disruption given Japan’s vulnerability to natural disasters, earthquakes, floods and tsunamis.

At the start of 2020, Japan’s parliamentary vice-minister for foreign affairs said that Japan’s digital currency could be a joint venture with public and private partners to align Japan’s goal with global changes in fintech.

Thailand

Since 2019, Thailand has joined forces with Hong Kong’s HKMA to test the use of a CBDC that would be used in cross-border payments between financial institutions in both countries.

According to a press release by the Bank of Thailand, “The development of a CBDC is a key milestone with the potential to alter the financial infrastructure and ultimately the financial landscape which could cause many changes in the roles of many stakeholders.”

Similar to other CBDC initiatives, the Bank of Thailand will seek out consultations and feedback with the general public as well as with the private and public sector on the “development and issuance of retail CBDC.”

The Bank of Thailand plans to start pilot tests for the usage of its CBDC in the second quarter of 2022.

Vietnam

Previously, the Vietnamese government had requested the State Bank of Vietnam to investigate blockchain-based currencies. It appears that Vietnam has joined the growing list of jurisdictions looking into CBDCs despite its previous harsh stance on cryptocurrencies.

In May 2020, the country’s ministry of finance announced plans to research and formulate a regulatory law for the crypto industry, even as the country experienced high levels of growth in digital currencies.

In July, the Vietnamese government decided to investigate CBDCs with plans to issue a pilot CBDC, given its utility for a small country in a global financial system that is dominated by the U.S. dollar.

Japan’s finance industry awaits clearer picture of digital yen in 2022

July 5, 2021 Coin Telegraph

Bank of Japan

The digital yen should be compatible with other CBDCs to counter China’s progress with its digital yuan, one official argued.

Japan will have more clarity on the design of its central bank digital currency no earlier than late 2022, according to a ruling party official.

Hideki Murai, head of the ruling Liberal Democratic Party’s panel on digital currencies, said that the Bank of Japan is still working on sorting out the key functions of the digital yen, such as defining what entities would serve as intermediaries between the central bank and deposit holders.

“By around the end of next year, we’ll have a clearer view of what Japan's CBDC would look like,” Murai said in a Reuters interview on Friday. The official said that the BoJ does not expect to make an immediate decision on whether to issue a digital yen by the start of the second phase CBDC testing — slated to start next year.

However, more details on Japan’s CBDC design could trigger a debate on how the digital yen will affect financial institutions, the official suggested.

Japan's financial industry is already undergoing major changes, with non-bank firms increasingly offering means for online settlements. If the digital yen is designed in a way that makes commercial banks key intermediaries, that shift could be reversed, Murai noted, adding:

“If the BoJ were to issue CBDC, it would have a huge impact on financial institutions and Japan's settlement system. CBDC has the potential to completely reshape changes occurring in Japan's financial industry.”

The official also said that BoJ must ensure that the digital yen is compatible with other global CBDCs in order to counter China’s progress with its digital yuan. “If a digital yuan becomes so convenient it’s frequently used by tourists or becomes a main settlement means for trade, the relationship between the yen and yuan could change,” eroding the yen’s status as a safe-haven currency, Murai warned.

The BoJ originally announced its plans to develop a CBDC in October 2020, stressing that the bank has “no plan to issue CBDC” yet. The bank launched its first phase of CBDC pilots in April 2021, targeting the development of a test environment and conducting experiments on basic CBDC functions related to payment, issuance, distribution and redemption.

Bank of Japan governor slams Bitcoin, calls BTC a speculative asset

May 28, 2021 Coin Telegraph

Bank of Japan

The BOJ governor says Bitcoin is a speculative play while issuing warnings over price volatility.

Haruhiko Kuroda, governor of the Bank of Japan has joined the roll call of central bankers taking aim at Bitcoin (BTC) amid the current volatility.

According to a report by Bloomberg on Friday, Kuroda argued against the value proposition of the largest crypto by market capitalization, stating:

“Most of the trading is speculative and volatility is extraordinarily high. It’s barely used as a means of settlement.”

The BOJ governor’s criticism comes as Bitcoin experienced an over 50% drawdown from its $64,000 all-time high price milestone achieved back in mid-April.

Indeed, several central bankers have taken Bitcoin’s current price wobble as an occasion to slam BTC and cryptocurrencies in general.

Earlier in May, Luis de Guindos, vice president of the European Central Bank also expressed negative sentiments about Bitcoin. As previously reported by Cointelegraph at the time, the ECB executive argued that cryptocurrencies had weak fundamentals and did not qualify as a real investment.

Recently, Lars Rohde, governor of Denmark’s central bank, dismissed the possibility of cryptocurrencies posing a threat to central bank autonomy. According to Rohde, big tech and not crypto is the real competitor to gatekeepers of the legacy finance arena.

Nobody who bought #bitcoin and Hodled for 4+ years (200 weeks) ever lost money, EVER. https://t.co/oDeJbCC9hW pic.twitter.com/BCK37uTsbF
— PlanB (@100trillionUSD) May 28, 2021

Also in May, Andrew Bailey, governor of the Bank of England warned that crypto investors were liable to lose all their money. However, as tweeted by PlanB, creator of the Bitcoin stock-to-flow model, long term BTC “hodling” — owning Bitcoin for at least 200 weeks (four years) — never resulted in a loss position for owners.

In fact, despite Bitcoin’s 50% decline since mid-April, BTC is still up about 22% year-to-date and has returned four-fold gains for holders over the last year. Billionaire hedge fund manager Ray Dalio has even tipped Bitcoin to be a better savings instrument than government bonds.

Apart from slamming Bitcoin, Kuroda also echoed the sentiments of other central bankers concerning the potential viability for stablecoins as long as their issuers conform to strict regulatory protocols.

BOJ’s Kuroda Criticizes Bitcoin — Central Bank Governor Says Trading Is ‘Barley Used for Settlement’

May 28, 2021 Bitcoin.com

Bank of Japan begins first digital currency proof of concept

April 5, 2021 Coin Telegraph

Bank of Japan

The first phase of Japan's CBDC pilots will be completed by March 2022, the central bank states.

The Japanese central bank has launched a proof of concept for its central bank digital currency, or CBDC, according to an official announcement on Monday.

Following initial preparations to test the technical feasibility of core CBDC functions and features in early 2021, the Bank of Japan is beginning CBDC testing in its first phase today. During this phase, the bank plans to develop a test environment for the CBDC system and conduct experiments on basic functions related to payment, issuance, distribution and redemption of a CBDC.

According to the announcement, this phase is expected to be completed by March 2022.

The BoJ originally announced its plans to launch CBDC testing in October 2021. The bank emphasized that while it “has no plan to issue CBDC ”from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, it is still important to prepare for “changes in circumstances in an appropriate manner.”

According to the original CBDC experiment roadmap, the bank expects to start a pilot CBDC program involving payment service providers and end-users after the completion of the second phase of testing. This phase will implement additional CBDC functions in the test environment developed in the first phase and determine their feasibility.

The BoJ recently announced the establishment of the Liaison and Coordination Committee to collaborate with both the private sector on the upcoming CBDC pilots.

Bank of Japan

China

Hong Kong

South Korea

The Philippines

Singapore

Cambodia

Japan

Thailand

Vietnam

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