Blockchain technology, the underlying innovation behind digital currencies including bitcoin was under the spotlight during the 3rd Fintech Forum held by Japan’s central bank.
The Bank of Japan’s Third Fintech Forum, saw officials from the central bank’s payments department admit that central banks around the world were researching the technology.
According to a report by Nikkei , the hot topic of the day was blockchain technology with private banks and financial institutions reportedly showcasing mock-ups of potential blockchain applications during the event.
In December, BOJ governor Haruhiko Kuroda confirmed that the bank’s payment and settlements department were “test-driving” blockchain technology, stating that it was becoming imperative that central banks “have a profound understanding of the innovation.”
Following testing, Yuji Kawada, another official from the payments department confirmed that blockchain technology had the “potential to yield benefits” during the Fintech Forum. However, trialing distributed ledger technology with the BOJ’s Financial Network System (BOJ-NET) – which powers electronic transfers of funds and securities in Japan– did not measure up to the current system in terms of processing capability, the official added.
The Bank of Japan has notably partnered the European Central bank to study the potential use-cases of blockchain technology in a joint research project from late 2016. The findings of the project are expected to be released this year.
In this week’s event, the Nikkei report reverts to questions posed by the private financial sector in the event of a BOJ-issued digital currency, wherein physical fiat cash in banknotes and coins would be replaced with digital records instead. The monetary policy installed and carried out by the central bank would be altered significantly if a digital yen were to be issued, as would the relationship between the central bank and private-sector banks.
When the inevitable question surfaced about a digital currency issued by the central bank, Hiromi Yamaoka, director-general of the Payment and Settlement Systems Department did not give much away.
Still, he stated:
[W]e will seriously consider what it is possible for a central bank to do.
In November 2016, Hiroshi Nakaso, the central bank’s deputy governor revealed that the bank had no specific timeline or plan to issue digital currencies as a means to replace cash. However, the senior official stated that the bank was in talks with academics to provide answers to significant questions concerning a central-bank issued digital currency.
Image from Shutterstock.