Last week Masayoshi Amamiya, Deputy Governor of the Bank of Japan, discussed the potential for a central bank digital currency (CBDC) at the Future of Payments Forum in Tokyo. He believes an important potential role is to enable interoperability between private payment systems.
He said that many advanced economies don’t really need a CBDC because, unlike Sweden, cash usage is not declining that rapidly. He also pointed to emerging economies such as the Bahamas and Cambodia, where the infrastructure was less developed and hence a CBDC provided greater advantages.
Turning to countries such as Japan, there is an expanding array of payment service providers. Digital money from one service provider is often not interoperable with another. The Deputy Governor didn’t mention names, but Apple and Google Pay are good examples, as are local initiatives like chat app Line Pay and by bank consortia, including SBI’s MoneyTap and Mizuho’s J-Coin.
“CBDC can help remove barriers of P2P payments and significantly improve the interoperability between different types of private digital money,” said Amamiya. “CBDC can contribute to improving the efficiency of payments by interlinking various types of private digital money.”
The Deputy Governor also mentioned the usual risks of crowding out private entities potentially for both payments and deposits. This week the Bank of England Deputy Governor made similar comments and was particularly concerned about the impact on the creation of credit.
In January, Amamiya made it clear that Japan has no immediate plans to issue a currency. For several years, the bank has been researching Central Bank Digital Currencies with the European Central Bank (ECB) under Project Stella.
More recently, the two central banks are now also collaborating with the central banks of Canada, England, Sweden, Switzerland as well as the Bank for International Settlements (BIS).