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Fearing ‘Currency Struggle,’ Japanese Politicians Want G7 Response to China’s Digital Yuan

Japanese politicians are calling on G7 members to respond to China’s digital yuan by collaborating on digital currency research.

Senior politicians from the ruling Liberal Democratic Party (LDP), led by former economy minister Akira Amari, told reporters Friday that Japan should share information and technical studies with the U.S. and other G7 members in order to respond to China’s digital yuan initiative, which could pose a serious challenge to the greenback’s global supremacy, Reuters reports.

“We live in a stable world led by dollar settlement. How should we respond if such a foundation collapses and if [China’s move] gives rise to a struggle for currency supremacy?” Amari said. As this year’s G7 chair, the U.S. should include digital currency on the agenda for the next meeting of the group, he added

A formal proposal calling for greater cooperation with the G7 on the matter of digital currencies will be officially presented to the government next week, the group confirmed. The G7 are expected to meet in Maryland this coming June.

Japan, like many other countries, relies heavily on a dollar-denominated settlement system that allows its banks and businesses to transact all around the world. Some fear that the Japanese economy could face significant disruption should developing nations begin using the digital yuan instead of the greenback.

On Wednesday, a Federal Reserve governor said the U.S. central bank was “conducting research and experimentation” into digital currencies so it can properly evaluate risks and benefits. It would also allow the U.S. to lead in the matter, the governor added. Fed officials are said to be concerned by private initiatives like Libra and the effects they could have on the global financial system.

The LDP group of lawmakers said in late January that it would propose that Japan issue its own digital currency in a joint project between the government and the private sector.

Last month, the Bank of Japan formed a working group along with five other central banks, including the U.K. and the EU, to coordinate and share research into digital currencies. The group will reportedly have its first meeting in Washington D.C. during the International Monetary Fund (IMF) conference in mid-April.

During Friday’s press conference, lawmakers argued Japan should prepare to issue its own digital yen. No further announcements have been made on the initiative, but considering the technical and legal barriers likely involved, Japan is not expected to release a digital yen anytime soon.


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Bank of Japan Deputy Governor Amamiya: Cheaper CBDCs could stifle private sector innovation

  • BoJ deputy governor foresees CBDCs affecting countries’ financial intermediation due to a shift in funds.
  • Central banks have to learn the pros and cons of CBDCs and seek ways to mitigate the risks.

The deputy governor of the Bank of Japan (BoJ) Amamiya in recent remarks says that central banks are bound to remain lenders of some kind even at the time when digital currencies are issued. Therefore, there is a need to carry out a monetary policy through the control of digital money flows.

Amamiya believes that central banks considering issuing their own digital currencies around the world should “conduct a comprehensive study on how it affects the country’s settlement and financial systems.” The deputy governor also warned against issuing cheaper central bank digital currencies (CBDCs), which is likely to stifle innovation in the private sector.

Moreover, if we reach a point where households and businesses start to prefer CBDCs over bank deposits then that could affect countries’ financial intermediation through shift in funds. Lastly, Amamiya said that central banks must seek to learn the pros and cons of CBDCs and explore ways on how to mitigate the risks

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No Cigar: Coronavirus Outbreak Forces China to Delay Digital Currency Plans

Despite the efforts to contain the coronavirus outbreak of COVID-19, the epidemic continues to cross the globe, with many other countries reporting relatively substantial spreads of the virus.

In South Korea, for instance, the number of cases has reached 1,600, from the sub-100 count seen just a week ago, and in Italy, too, the coronavirus is rapidly spreading.

Understandably, this has started to affect many facets of the world’s economy and daily living — Bloomberg reported that the count of visitors arriving in Hong Kong is down over 90%, companies like Apple and Samsung have started to see the outbreak affect their business, and many across the world have been forced to stay home from work and school amid the unrest.

The damaging effects of the outbreak were accentuated on Tuesday, when a Chinese state-run media outlet confirmed that the coronavirus has hampered the development of the People’s Bank of China’s (PBOC) digital currency plans.

Chinese Media: Digital Currency On Hold as Coronavirus Spreads

If you’ve followed the crypto news cycle over the past few months, you’ve likely seen the near-incessant stream of reports that China’s central bank, the PBOC, is on the verge of launching its own digital currency, branded the “DCEP” by reports from local media.

In fact, a December report from Caijing, which cited individuals familiar with the PBOC’s operations, suggested that the central bank was going to roll out a pilot program for the national crypto asset at the start of 2020 in Shenzhen and another municipality.

Despite other reports corroborating the idea that the PBOC was done the base layer development of their digital yuan, nothing came of the Caijing report and others like it. The reason: coronavirus.

According to a recent report from The Global Times — an English news outlet closely affiliated with the Chinese Communist Party’s de-facto media mouthpiece, The People’s Daily — “sources close to the matter” say “China’s research into its sovereign digital currency has been delayed from the first quarter due to the outbreak of the coronavirus.”

The source elaborated that the outbreak has forced staff of the PBOC and of other government institutions to stay home and avoid certain activities, “which weighs on the development process.”

This was further confirmed by Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, a company that The Global Times claims is involved in the launch of DCEP. Shentu purportedly said while the PBOC intended to make an announcement regarding the digital currency in Q1 2020, the chances the “announcement could be made on time are slim.”

Those interviewed by the outlet remain largely optimistic, however, affirming their support for the project and suggesting that the launch of the digital currency is likely still on track to take place sometime this year.

Other Effects Are Being Felt

The coronavirus outbreak has been affecting the cryptocurrency and blockchain space in other ways.

Over the past few weeks, even as BTC’s price has shot higher from the $6,400 December bottom, the hash rate of the Bitcoin network has stagnated around 110 exahashes per second. While this metric is still nearly triple that seen one year ago, the stagnation began when the coronavirus began hitting mainstream media headlines in the West, around the start of January.

This suggests the coronavirus is slowing the efforts of Bitcoin miners to expand their operations; indeed, as explained in a previous Blockonomi report, Jiang Zhuoer of BTC.Top revealed that the police had shut down his mine due to the coronavirus.

Also, crypto conferences have been delayed, as have conferences in the traditional tech world. Most notably, Token2049 — a Hong Kong conference that this writer intended on attending this March — was pushed until October.

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Bank of Japan Deputy Governor Amamiya: Cheaper CBDCs could stifle private sector innovation

  • BoJ deputy governor foresees CBDCs affecting countries’ financial intermediation due to a shift in funds.
  • Central banks have to learn the pros and cons of CBDCs and seek ways to mitigate the risks.

The deputy governor of the Bank of Japan (BoJ) Amamiya in recent remarks says that central banks are bound to remain lenders of some kind even at the time when digital currencies are issued. Therefore, there is a need to carry out a monetary policy through the control of digital money flows.

Amamiya believes that central banks considering issuing their own digital currencies around the world should “conduct a comprehensive study on how it affects the country’s settlement and financial systems.” The deputy governor also warned against issuing cheaper central bank digital currencies (CBDCs), which is likely to stifle innovation in the private sector.

Moreover, if we reach a point where households and businesses start to prefer CBDCs over bank deposits then that could affect countries’ financial intermediation through shift in funds. Lastly, Amamiya said that central banks must seek to learn the pros and cons of CBDCs and explore ways on how to mitigate the risks.

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