This year has already been especially eventful for Japan’s crypto ecosystem – generally regarded as a major segment of the industry – prompting the Bank of Japan (BoJ) to issue a study on the role of central bank digital currencies (CBDCs) in the existing financial system.
Although crypto is regarded as legal tender in Japan, authorities have been cautious in their approach to the possible introduction of a CBDC. Unlike many other digital assets, CBDCs are issued and controlled by a federal regulator, and are therefore not decentralized. It has been suggested that such a currency could enable central banks to charge more interest on deposits, in order to motivate greater spending and, in turn, revitalize the financial system.
This theory has received pushback from the central bank’s deputy governor, Masayoshi Amamiya, who claimed that charging interest on currencies issued by the central bank would only force the public to continue converting digital currencies to cash, so as to avoid paying interest.
Japan’s national regulator, the Financial Services Agency (FSA), has meanwhile maintained strict control over local crypto exchanges in the wake of two major security breaches. Numerous precautions have since been introduced, including mandatory risk management reports and on-site inspections of exchange offices.
Although these tough measures have caused some major players to leave the Japanese market, as many as 190 are reportedly pending approval by the FSA to gain access. Players such as Yahoo’s Japanese arm are also seeking to open their own crypto exchanges.
Additionally, numerous private firms including banks, brokerages, trading giants and IT players have announced blockchain-related news within the past several months. Marubeni Corporation, a major domestic trading and investment business conglomerate, and investment bank Daiwa Securities Group reported blockchain-related advances in their businesses, while local banking giant Mizuho Financial Group announced the launch of its custom stablecoin.
These developments suggest that Japan will continue to be a technology-focused market with long-term innovative potential.
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