Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya said that before they issue their own digital currencies, central banks around the world should attempt to get a better understanding of the pros and cons of the process, according to a report by Reuters.
Amamiya said that banks should also look at ways to prepare for the potential downsides of releasing a digital coin. He added that central banks could act as a connector for private money flows and help to streamline settlement.
A digital coin could also minimize financial innovation in the private sector and pull money from commercial banks, in terms of deposits, especially if they pull off a low-cost digital currency.
“When countries consider issuing central bank digital currencies, they must conduct a comprehensive study on how it affects their settlement and financial systems,” Amamiya said.
Emerging economies have been pondering central bank digital currencies (CBDC) as a way to combat money laundering, or to help with a financial infrastructure that isn’t as resilient as they would like it to be.
However, countries like Japan and other advanced economies don’t have such pressing problems, and there is no reason for them to rush to create CBDCs. “Unlike emerging economies, we cannot and should not jump immediately” toward digital coins, he said.
In an advanced economy, the way to deal with problems like money laundering is through oversight and government regulations, Amamiya said.
BOJ officials still plan to create a team that would look into CBDCs and see what potential they have to offer. They will also confer with colleagues overseas on the topic.
One of the reasons that CBDCs are such a talked-about topic is Facebook’s push for its own cryptocurrency, Libra. The social media giant’s initiative has pushed many central banks to speed up the development and research of digital coins. Banks in Canada, Sweden and Switzerland, among others, have all been working on digital currencies.