Digital currencies are growing in popularity but, in terms of replacing physical money, that isn’t going to happen anytime soon.
That’s according to Hiromi Yamaoka, head of the Bank of Japan’s payment and settlement systems department, who made those comments on Wednesday (Nov. 22) on the sidelines of a financial innovation conference hosted by Thomson Reuters.
“It’s too far off,” he said, in an interview with Reuters. He also noted, “It would change the banking system too drastically.”
While other countries are warning against cryptocurrency and initial coin offerings (ICOs), Japan has been embracing digital currency and has become a leader in the FinTech market. Earlier this year, Japan recognized Bitcoin as a legal tender and signed off on several companies that created cryptocurrency trading exchanges.
As part of the new law that has “legalized” Bitcoin in Japan, the nation’s Financial Services Agency has put capital requirements — along with cybersecurity and operational stipulations — in place for Bitcoin exchange. Additionally, Bitcoin exchanges in Japan will now be required to conduct employee training programs and submit to annual audits.
In 2016, the Bank of Japan created a unit that is in charge of FinTech, providing guidance to banks that want to get into the burgeoning market. It has joined with the European Central Bank to look at distributed ledger technology such as blockchain. The two organizations said in September that blockchain wasn’t there yet, in terms of maturity to power the large payment systems, but on its way.
“From a practical perspective, I think this is still ‘under construction’,” Yamaoka told the forum about blockchain.
As for ICOs, the banking official said the hype level was “quite tremendous.”
Japan’s stance on cryptocurrencies comes as China and South Korea have banned ICOs and China has taken steps to block cryptocurrency trading in its country. Other government regulations in the U.S., Russia, U.K. and Europe have all warned about the risks associated with investing in ICOs and cryptocurrency. After all, to say the digital currency is volatile is an understatement. Bitcoin began the year valued at approximately $1,000 per coin and has since exceeded $8,000 per coin.