Could Central Bank Digital Currencies Destabilize Existing Financial System?
According to Bank of Japan (BoJ), yes.
Bank of Japan’s deputy governor has a negative impression about how central bank-issued digital currencies (CBDC) would affect the current financial system. In his closing remarks during a FinTech conference which was published on 16th April, Deputy Governer Masayoshi Amamiya made his feelings about CBDC clear.
Though he spoke negatively of CBDCs, he said that the bank is open for future applications of emerging technologies like the blockchain technology. The FinTech conference was a joint collaboration between the International Monetary Fund (IMF), the Bank of Japan and Japan’s Financial Services Agency.
Amamiya spoke of the previous challenges which the international financial authorities have faced—2008’s global financial crisis. The arrival of the blockchain technology and CBDCs is now “stimulat[ing] global discussion on to what extent central banks should provide their payment and settlement infrastructures to society.”
According to him, you can see the banks “reflect[ing] the wisdom of human beings in history to achieve both efficiency and stability in the currency system” when they communicate with other banks which further deal with the private sector. He said:
“The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks’ financial intermediation.”
He also mentioned that CBDCs could change the way central banks gather information about transactions. According to him:
“To sum up, IT innovation raises many fundamental questions and challenges related to the currency system, the design of central bank infrastructure and the utilization of information attached to economic activities.”