Plans of Digital Yen Apparent; Japan Plans on Forming an Expert Panel For Development

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Cryptocurrencies and the blockchain as a whole are among one the fastest-growing sectors in the world, in terms of popularity and monetary value. The industry, which was barely worth around $7 billion in 2016 is currently worth more than $1 trillion with the community size increasing at a considerable pace globally. This has caused not just major organizations, but also governments across the world to take crypto as a serious and high-potential segment. The latest addition to this growing list of countries that plan on using blockchain technology at the moment is Japan.

Anyone following the financial industry or global economy must have come across the concept of blockchain, and how it has been revolutionising multiple fields, thanks to the innovative solutions it has to offer. Infact, governments have been openly debating and discussing the future of cryptocurrencies and their integration into their financial systems.

While there have been several incidents in the past year where countries publicly announced their plans to take advantage of blockchain technology, the most recent one was Japan, which has stated its plans to create a blockchain version of its fiat currency- the Japanese Yen.

The Framework for Digital Yen to be taken from Bank of Japan’s 2-Year Study

The announcement was covered instantly by the Japanese media outlet NHK, which stated that the framework for Japan’s Digital Yen shall be based on the study that the Bank of Japan (BOJ) conducted over the course of two years. This study explored cryptocurrencies, their effect on the economy, and other factors to consider before using them as a method of payment.

It was mentioned that the Ministry has plans to launch an expert panel in May to start looking at the possibility of issuing the digital Yen. This would mean that like other countries that have been looking to create a Central Bank Digital Cryptocurrency (CBDC), Japan too may be focused on creating a pro-blockchain environment for its citizens in the future.

Officials from BOJ (Bank of Japan) have stated that they do not have any immediate plans to introduce a digital currency, as legal and framework issues need to be resolved first. It is anticipated that this process will take time. Apart from the national bank, several other financial institutions in Japan are expected to contribute to the success of the program, if it does take off as planned.

The introduction of a CBDC for Japan could mean increased convenience for the citizens in terms of overseas payments, business transactions and similar activities. However, the issue of illiteracy when it comes to blockchain technology or the concept of CBDC could be a massive problem that the government may need to tackle in a systematic manner.

What is a CBDC?

The central bank of a nation issues and backs digital fiat currency known as CBDC or Central Bank Digital Currency. It is a kind of digital currency that promises to give users a safe, effective, and affordable way to conduct transactions. A CBDC can be used for a variety of transactions, including payments, remittances, and settlements, and its value is tied to the value of the real currency.

Several countries are looking at the usage of CBDCs as a potential replacement for actual cash as well as a way to increase financial inclusion, lower transaction costs, and boost the effectiveness of payment systems. Furthermore, CBDCs could provide central banks more control over the money supply, allowing them to better implement monetary policy. This, however, may not be welcomed by many as the issuance and use of CBDCs would mean that governments would have more control over the funds of citizens.

Other Countries Have Started Embracing Bitcoin and Blockchain Technology

Since last year, some countries have begun to adopt or investigate the usage of cryptocurrencies for diverse purposes. El Salvador is one of the most famous instances, as it was the first nation to recognise Bitcoin as a legal tender alongside the US dollar in 2021. The decision was made to increase financial inclusion and draw foreign investment, but it has also paved the way for several debates and worries about the volatility and risks that cryptocurrencies feature.

Other nations that have experimented with or adopted blockchain technology include Switzerland, which houses the “Crypto Valley” in Zug and has a regulatory environment that is crypto-friendly. China has also been looking into the creation of a digital yuan as a CBDC despite having a tough policy on the use of cryptocurrencies in general.

Many initiatives have been started in the United Arab Emirates as well to encourage the use of blockchain technology and digital assets, including a regulatory sandpit for fintech innovation.

Has This News Affected Crypto Prices?

The cryptocurrency community was quick to respond to Japan’s latest move in the form of multiple tweets and social media posts. While such a piece of news usually has a good impact on cryptocurrency prices, no considerable upward movement was seen in the frontrunner crypto Bitcoin. The crypto has already been on an uptrend, but the lack of an instant pump post the news would indicate that the plan simply being announced may not have affected the buyers’ urge to stock up on the digital asset at a quicker pace.

At the time of writing, BTC is priced at around the $28,300 range and has been showing consistent growth over the past 24 hours. While it may not have shown much volatility due to the news, one must note that the crypto has already been bullish in nature since the start of 2023 on a larger level.

Conclusion

Several nations continue to be wary or even antagonistic towards cryptocurrencies due to worries about, financial stability, consumer protection, and money laundering. There is still a lot of discussion and ambiguity about cryptocurrencies’ potential and position in the global economy, and the legal and regulatory environment for them differs significantly across different jurisdictions.

Yet, these more modest moves towards embracing blockchain technology and cryptocurrency adoption may ultimately result in the sector being recognised as genuine on a worldwide scale, which could have a significant impact on international banking in the upcoming years.

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