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Some players want to develop a dominant central banking digital currency. Some want to be a top market for cryptocurrencies. Japan is establishing the foundation to be both. finews.asia takes a look at its uniquely synchronized supply-side dynamics.
As the third-largest economy with a sovereign currency and high growth neighbors, there are few other markets in the world with enough clout to make waves as a dual player in electronic money.
While the U.S. and China are making rapid progress to develop their own central banking digital currencies (CBDCs), neither are very keen on opening the crypto floodgates. The former involves a cautious government while the latter has flat out cracked down on the market and recently proposed a ban even on yuan-linked stable coins.
Japan: Enough Space for Both
Meanwhile, Japan is establishing its foundation as both a major player in fiat and crypto money.
The nation has been relatively open to cryptocurrencies, having amended its laws to recognize bitcoin and other virtual currencies since 2016 as legal tender for payment. Although its digital payment market is not as large as those of its global peers, it is rapidly developing in maturity and sophistication. SBI, for example, partnered with Ripple this month to reportedly pay the salaries of at least three e-sports teams in the XRP token.
And concurrently, the Bank of Japan (BoJ) has called the development of a digital yen a top priority due in no small part to the potential rise of a digital yuan. The central bank has announced plans to trial the digital yen by April 2021 beginning with issuance and distribution in the first phase followed by testing of functions like issuance limits or remuneration on deposits in the second phase.
Less Coop, More Competition
China’s path towards the digital yuan has required tightening and some economic dismantling of the cryptocurrency industry – across trading, custody, mining and more. Industry watchers claim that it could also be used to keep payment giants like Alipay and WeChat Pay in check and curb their growth, according to a «Nasdaq» report.
In the U.S., there has been talks of the Federal Reserve considering direct issuance of CBDCs to end-users’ wallets without the involvement of commercial banks. President Donald Trump last year also publicly attacked cryptocurrencies in a tweet and said Facebook’s Libra «will have little standing or dependability».
More Coop, Less Competition