More and more countries in the world have started to set up their own national digital currencies, and now Japan has joined them.
Japan's deputy foreign minister, Norihiro Nakayama, said earlier today that lawmakers are considering issuing a digital version of the yen. The project will be jointly run by the government and several Japanese private companies, with the aim of giving Japan a step ahead in the digital currency field.
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Nakayama said that a digital currency proposal could be submitted as early as February this year.
So why is Japan making its own digital currency? Two reasons: Libra in China and Facebook.
China has been making digital RMB since 2014. Although most details of the project are unknown, concerns have been raised in countries close to China, including Japan.
One of Japan's biggest concerns is that China will seek to establish a digital yuan as a settlement currency. Taro Aso, Japan ’s finance minister, explained that this would be a “very serious problem” because Japan uses the U.S. dollar to settle transactions, and most Japanese still prefer cash.
There is also a general concern that China's digital currency may be used as a form of financial surveillance-a way to peek into the private financial details of any user who uses this currency for transactions. Mu Changchun, director of the Digital Currency Research Institute of the People's Bank of China, tried to eliminate these concerns last November. He said that users can still conduct anonymous transactions, and the digital RMB is designed to "promote inclusive finance in rural areas."
As for Libra, despite the obstacles that global regulators have put in place since it was first announced in June last year, the Facebook-led project continues. Last week, a new "Technical Steering Committee" was formed, which will consist of five founding members to oversee the development of the project. As of last November, Libra's testnet has processed more than 50,000 transactions in 34 projects on its blockchain.
Zou Chuanwei, Bitmain's chief economist, explained in an interview that Libra "presents a huge threat" in mobile payments. To a large extent, China relies heavily on mobile payment platforms such as WeChat and Alipay, and Libra may subvert these platforms.
But Japan may have a different view of Libra. Last July, the Nikkei Asian Review reported that Japanese lawmakers were concerned that Libra would be difficult to regulate. They said that because Libra was pegged to a basket of different fiat currencies, this prevented it from being linked to the politics of a single country.
But given the dwindling number of Libra supporters-British telecoms giant Vodafone is the main partner who recently withdrew from the Libra Alliance-Japan and other countries may not end up having much concern.