- Deputy Governor of Bank of Japan argues that it’s entirely impossible for central banks to charge interest rates on cryptos unless cash is eliminated
- Claims the BOJ is not interested in launching own digital currency for now
The Deputy Governor of Bank of Japan, Masayoshi Amamiya, has expressed doubts over the ability of central bank backed digital currencies to enhance the effectiveness of the monetary policies of apex banks, reported New York Times on October 20th.
Fiat in the way of national cryptocurrencies
At a time when some academics have reportedly said that digital currencies could help central banks overcome the “zero lower bound” challenge and take control of the economy when interest rates crash to ground zero, Amamiya thinks otherwise.
As stated in the report, in theory, cryptoassets make it easier for central banks to charge interest rates on deposits of households and companies, invariably encouraging them to spend more.
However, Amamiya has stated categorically that it would be almost impossible for central banks like the Bank of Japan to charge interest on distributed ledger technology (DLT) digital assets unless apex banks eliminate fiat money from circulation.
Otherwise, crypto holders will dodge paying their cryptocurrency taxes by simply converting their digital assets into cash.
“In order for central banks to overcome the zero lower bound on nominal interest rates, they need to get rid of cash from society,” he said, adding that the BOJ is not interested in getting rid of fiat money at the moment, as it is still widely used in the country.
The official also made it clear that the Bank of Japan does not plan to issue a CBDC in the near future, adding that blockchain money still has a lot of drawbacks to overcome, including volatility and regulatory hurdles, before going mainstream.
Amamiya claimed that digital currencies are yet to gain significant adoption and are rarely used by its holders to make day-to-day payments for goods and services. Instead, the nascent digital assets class are mostly used for “speculative investment.”
Digital Assets Still Have Excellent Potential
Despite Amamiya’s negative stance towards cryptocurrencies, the fact remains that even though a central bank issued cryptocurrency will eventually not be beneficial to central banks, the innovation undoubtedly has a lot to offer to the masses.
As reported by Blockchain Reporter on October 14, 2018, Peter Van Valkenburgh Director of Research at CoinCenter, a leading non-profit organization, testified in support of DLT and cryptos in a U.S Senate Banking Committee hearing, explaining that the burgeoning technology and cryptoassets are essential to the future of the internet.