Japan’s Liberal Democratic Party Encourages Government to Make Preparations in Issuing Digital Currency

According to a report from the Nikkei newspaper on February 7, an alliance of strategic policymakers for formulating rules (led by chairman Akira Amari) for Japan’s ruling Liberal Democratic Party decided on a proposal to urge the government toward preparing for the issuance of digital currency. The lawmakers will be handing the proposal over to Prime Minister Shinzo Abe soon.

 

The Bank of Japan announced on January 20 that it established a group to do joint research toward issuing central bank digital currency (CBDC) primarily from key central banks. Aside from the Bank of Japan, five other banks, including the Bank of Canada, Bank of England, European Central Bank, Sveriges Riksbank (Swedish Central Bank), and Swiss National Bank, are members of the Bank for International Settlements, which has established a group for the purpose of sharing knowledge pertaining to evaluations on the possibility of using digital currency from central banks in countries and regions.

 

According to the Japanese media, the proposal decided on by Mr. Amari encompasses investigation into the law’s potential to deal with money laundering countermeasures and protection of personal information. Mr. Amari is requesting a partnership with the US Federal Reserve Board concerning joint research being done at key central banks such as the Bank of Japan.

 

Mr. Amari has expressed concern over the possibility of swift diffusion of the “digital renminbi” that is being investigated by the Central Bank of China to construct a Chinese economic zone in countries involved in the One Belt One Road project. Should international trade tied to the Chinese renminbi increase, the power of US economic sanctions could weaken due to suspension of trade pegged to the US dollar. Mr. Amari points out that “this (scenario) would have a significant impact on Japan’s security.”

 

In the proposal, as “countermeasures that digitize key currencies including Japanese yen to maintain the core system with the US dollar as the axis,” the lawmakers “strongly request that the government and Bank of Japan ‘partner with overseas banking authorities in responsive measures including digitalization of Japanese yen, and swiftly investigate and prepare for this issue.’”

 

In Japan, the limit for leverage trading of cryptocurrencies is expected to be pulled down to only two times after April this year. At present, there are many major domestic cryptocurrency exchanges that have leverage set at four times. Bitcoin is also expected to experience a halvening (the timing in which the amount of new Bitcoin issued is decreased by half), leading to a rising market, but investors within Japan are more focused on how Japan’s market will be impacted by the appearance of digital yen and the decrease in the leverage limit.

 

*This article was written by FISCO.