Haruhiko Kuroda: government stablecoins can improve the convenience of payments

The governor of the Bank of Japan, Haruhiko Kuroda, believes that the central bank's digital currency (CBDC) should work alongside other payment mechanisms to improve Japan's financial ecosystem.

Kuroda stated that government stablecoins can increase the convenience of payments for users, as CBDCs are an integral part of increasing financial inclusion and speeding up international transfers.

"When a central bank digital currency is seamlessly convertible to and from other forms of money, it ensures uniformity. In other words, balance is maintained when one yen equals one yen regardless of the payment instrument,"

Kuroda explains.

Kuroda emphasized that stablecoins, cash, bank deposits, and digital currencies are all competing to be the primary payment instrument, but it is important to leverage the strengths of each instrument to improve the stability and security of Japan's payment system.

According to Kuroda, when a central bank digital currency is seamlessly convertible to and from other forms of money, it ensures uniformity and maintains balance in the payment system, where one yen equals one yen regardless of the payment instrument.

The Bank of Japan started testing the digital yen in 2020 by partnering with several private firms. The digital yen pilot project will not be fully centralized and will rely heavily on the results of previously completed proof-of-concept (PoC) testing. The Bank of Japan recently announced that it would pilot its own digital currency in April.

It is worth noting that Kuroda had a different opinion about government cryptocurrencies a few years ago, stating that there was no demand for a central bank digital currency in Japan and that he was concerned about the associated risks. However, his recent comments suggest a change in perspective regarding CBDCs and their role in Japan's financial ecosystem.

The shift in Kuroda's position reflects a growing trend among central bankers worldwide to explore the potential benefits of CBDCs. Many see CBDCs as a way to improve payment systems and promote financial inclusion, particularly for those without access to traditional banking services.

However, CBDCs also pose potential risks, such as privacy concerns and the possibility of financial instability. Central banks will need to carefully consider these risks and find ways to address them before implementing CBDCs on a larger scale.

In Japan, the government has been exploring the use of CBDCs for several years, and the Bank of Japan has been actively researching and testing the technology. The bank's recent announcement of a pilot program for its own digital currency signals a commitment to further exploring the potential of CBDCs.

It remains to be seen how Japan's CBDC will be received by the public and how it will be integrated into the existing payment system. However, Kuroda's comments suggest that the bank is committed to working with other payment mechanisms to create a more stable and secure financial ecosystem in Japan.

In conclusion, Haruhiko Kuroda's recent comments about the Bank of Japan's digital currency reflect a shift in perspective regarding CBDCs and their potential benefits for Japan's financial ecosystem. While there are still risks associated with CBDCs, the Bank of Japan's commitment to exploring the technology suggests that it sees potential in its use. As CBDCs continue to gain traction worldwide, it will be interesting to see how they are implemented and integrated into existing payment systems.