What has happened?

The Bank of Japan (BoJ) has indicated that it is not planning on introducing a national cryptocurrency.

What does this mean?

In closing remarks at a conference with the International Monetary Fund and the Financial Services Agency on financial innovation in Asia this week, BoJ Deputy Governor Masayoshi Amamiya said that issuing a central bank digital currency for general use would affect the existing two-tiered currency system and private banks' financial intermediation.

Under the current system, the central bank supplies banknotes and central bank deposits, while private banks create credit and provide deposit currencies as broader money.

Amamiya said that this modern two-tiered structure "reflects the wisdom of human beings in history to achieve both efficiency and stability in the currency system".

He added that:

"The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks' financial intermediation."

Even though Amamiya said that the BoJ has no plans currently to introduce its own digital currency, he said that the bank understands the importance of understanding innovative technologies for maintaining financial stability and also "for seeking the possibility of applying them to central bank infrastructure in the future".

As such, the BoJ has been conducted various initiatives involving innovation and FinTech.

For example, it has been conducting a joint research project, called "Project Stella", with the European Central Bank to study the potential of distributed ledger technology and, in 2016, it established a FinTech Center.

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