Japan Central Bank reviews the report on Central Bank Digital Currencies

In a report released by the Central Bank of Japan, it has examined the present and future role of central bank digital currencies play in the current monetary system. The review comes following the categorization of the central bank digital currencies into two last year by the Bank of International Settlements.

With the increase in digital innovations and increase in cashless payments and crypto-assets there is a feeling by some proponents that central banks should move CBDCs instead of conventional banknotes.  The Central Bank of Japan is however not having any immediate plan to issue CBDCs have but who knows what the future holds.

Categorization of the CBDCs

The CBDC can be either general purpose or wholesale CBDCs. In the released report the bank provides detailed insight into the possible ways that CBDCs can be implemented as well as the underlying hypothetical consequences of the various approaches used.  According to the report general purpose, CBDCs are those that can be accessed by the general public and they are in form of banknotes and the other category of wholesale CBDCs include those that are limited to significant value investments.

Generally, the focus of the applications and implication of CBDC in the report is mainly on the general CBDC indicating how the wholesale CBDCs will have minimal bearing on the monetary system.  The report even noted that blockchain and distributed ledger tech could generally be important in the making of token-based CBDC.

CBDCs may not appeal to all

In October 2018, Masayoshi Amamiya, the Central Bank deputy governor of Japan, raised objections to the stance of having central banked digital currencies. He expressed doubts over the use of CBDCs indicating that the use of such currencies is unlikely to enhance the present momentary systems.

The CBDCs are considered by some as a tool to control the economy by central banks in the event interest rates drop to zero. Amamiya indicates that charging interest on central bank issued currencies is rather tricky and can only work if fiat money is done away with because people will circumvent the system and continue converting virtual currency into cash and thus avoid paying interest.

Meanwhile, besides Japan, the South Korean Central Bank has also issued a warning about CBDCs and indicated that they have no plans of issuing one of its own.