October 7, 2022


The country’s central bank has put its CBDC pilot on hold, arguing that it requires further exploration and understanding of the market.

BoJ reviews CBDC

In 2021, the Bank of Japan (BoJ) was one of the national central banks around the world toying with the idea of ​​tapping into the digital currency movement and launching its own Central Bank Digital Currency (CBDC) backed by yen. The project had progressed far enough that its second test phase was set to begin in April 2022. However, the landscape has changed since last year and the industry has rested in a bear market to freeze in a crypto winter. As a result, many institutions are backing away from their crypto projects and commitments, and the Bank of Japan is one of them. The authorities are not so favorable to the encryption space now. The BoJ claimed that Japanese citizens already have viable alternatives to digital payment, and therefore needs to reconsider its plans for the digital gen.

Existing digital payment services are a challenge

Bank officials revealed that due to the existence and widespread use of many low-cost and high-performance online banking services and digital payment tools, Japanese citizens simply do not need a CBDC. In addition, current payment services have various brands and commitments, which allow them to offer additional services. Users can not only use these tools to make payments and transfer money but also earn payment points that can later be used to make purchases or redeem settlements. According to the Bank of Japan, it cannot compete with this level of benefit systems. Additionally, a CBDC program will not get the kind of initial momentum needed to deliver the full range of benefits that come with cryptocurrencies.

Japan’s “cash hoarding” problem

Another obstacle to the digital yen program is the country’s high rate of cash issuance. With 20% of Japan’s nominal gross domestic product invested in cash issuance, Japan’s older demographic is still heavily dependent on cash. With the highest proportion of elderly citizens in the world (about a third of the country’s population is over the age of 65), the country’s overall cash dependency is still quite high. In addition, Japan’s long-term low retail deposit rate (just 0.001 as of 2017) reinforces its already high cash flow rate. As a result, many citizens still choose to hold cash instead of depositing it in bank accounts, leading to a growing trend of cash hoarding.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.





Source link

Leave a Reply

Your email address will not be published.