- Bank of Japan Doubts Cryptocurrency Will Enhance Monetary Policy
The Deputy Governor, Bank of Japan, Masayoshi Amamiya on Saturday said it is unclear whether digital currencies, Cryptocurrencies, could effectively enhance monetary policy.
While experts have argued that central banks could overcome the “zero lower bound” – a condition where they lose means to stimulate the economy once interest rates fall to zero – by issuing digital currencies to directly debit depositors, the Bank of Japan doubted that possibility.
Some academics also argued that digital currencies would allow central banks to charge interest on deposits of households and firms easily, therefore forcing them to spend rather than hoarding funds during tough economic periods.
However, Amamiya countered the idea, saying issuing digital currencies in order to charge interest on deposits would only work if central banks eliminate cash from society. Otherwise, the public will just convert digital currencies into cash to avoid paying interest.
“Getting rid of cash now is not an option for us as a central bank,” as cash is still widely used in Japan, Amamiya said, according to a text of the speech posted on the BOJ’s website.
Amamiya further said there was “quite a high hurdle” for crypto-assets to overcome sovereign currencies – or currencies issued and backed by central banks – as the main means for payment and settlement.
“This is backed up by the fact that crypto-assets are rarely used for day-to-day payment and settlement, and are mostly a target for speculative investment,” he said.