Bank of Japan Governor Haruhiko Kuroda called on Tuesday for accelerated efforts by global policymakers to curb risks that may emerge from the wider use of private digital currencies.
“If the existing regulatory framework is left unchanged, private digital assets could cause greater risks going forward,” such as them being used for illicit purposes or to bypass capital controls, Kuroda said in a seminar held in Zurich that was livestreamed live on the internet.
The widening use of stablecoins could also cause fragmentation in payment and settlement systems, if various providers offer services using different platforms, he said.
While the BOJ has not decided whether to issue a digital yen, providing a retail central bank digital currency (CBDC) could be an option to secure a seamless and safe infrastructure in Japan, Kuroda said.
“CBDC is not the only way, so a national discussion is needed as to how to achieve this goal,” Kuroda said on how to ensure a safe settlement system amid the widening use of private digital currencies. “Retail level CBDC is a option,” he added.
Cryptoassets and stablecoins have come under the regulatory spotlight amid concerns they could be used to evade financial sanctions imposed on Russia since its invasion of Ukraine.
If the BOJ were to issue a CBDC, it would have private financial institutions serve as an intermediary, Kuroda said.
“It’s not safe, not efficient, and not good for the sake of privacy” for central banks to use CBDCs to dominate the entire settlement system, he said.
Central banks around the world have accelerated experiments on issuing CBDCs partly to counter rapid technical innovation in the private sector on the area of digital currencies.
The BOJ began the second phase of CBDC experiments from April, which will last about a year and check features such as whether to set a limit on the sum each entity can hold.