Tuesday, December 7

From britcoin to digital yen: if you can’t handle cryptocurrencies, join them


The cryptocurrency market remains as volatile as ever, in a week where bitcoin hides its head for fear of the Fed’s tapering, but the reality is that cryptocurrencies have become a very important asset in the portfolio of many investors, and in the face of its threat, central and private banks are increasingly testing their own digital assets.

Reuters published today exclusively the start up of a consortium of about 70 Japanese firms, including the most important banks in the country, such as Mitsubishi UFJ, Mizuho y Sumitomo Mitsui, to launch a digital Japanese yen dubbed “DCJPY” in 2022.

The name of DCJPY responds to the acronym in English digital currency japanese yen, the Japanese yen of digital currency, and according to information from the British news agency, the asset would be backed by bank deposits and would use a common platform to lighten transfers of funds and payments between companies.

The initiative of the Japanese consortium is the latest sign that financial entities and institutions want to join a market that reached a maximum total capitalization of 2.6 trillion euros, and continue to work in their own digital currencies, but it is not the only one .

Central banks don’t want to be left behind

On JapanIn fact, the country’s central bank works in a CBDC own. The CBDC are the digital currencies of central banks (Central Bank Digital Currency), and the Bank of Japan you’ve already started experimenting with your own.

In a April release, the Japanese bank reported the start of phase 1 testing of its CBDC after having carried out preparations during the first months of 2021.

During this first phase, the statement states, the bank plans to “develop a test context for the CBDC system, and carry out experiments on the basic vital functions of the CBDC as a payment instrument, such as its issuance, distribution, and redemption. “.

The testing phase will end in March 2022, at which time the Japanese bank will decide whether to launch the asset, and that it could compete with the proposal announced today by the consortium of entities from the Asian country.

Although from the Asian central bank they argue that “it is unlikely that the cash in circulation will decrease significantly”, they want to be prepared.

Therefore, the Bank of Japan has been considering this possibility for some time, recognizing that “there is the possibility of an increase in public demand for a CBDC, considering the rapid advance of technological innovation.” And they are not the only ones.

If you can not beat them, join him

The governor of Bank of england, Andrew Bailey, met with his Lieutenant Governor, Jon Cunliffe, at a parliamentary hearing where he was questioned about the future of CBDC in the British country, where Bailey works on a “britcoin” that can coexist with cash and bank deposits.

“The Bank of england will continue to make cash available to users for as long as there is demand for it […] but the reality is that the use of cash is falling significantly, “Cunliffe said during the session.

For that reason, the lieutenant governor affirmed that the English entity considers that it is its task to supply society with money, and not “to depend completely on the private sector” to carry out this task.

“Right now, most of the money we use is provided by commercial banks, but technology and new entrants mean that is probably not the scenario in the future,” Cunliffe said.

Under this premise, the central bank and the British treasury will launch a consultation that “evaluates the main problems that may arise, considers the design features, as well as the possible benefits and implications for users and companies.” In a setting where the Bank of england emit CBDCCunliffe predicted that “banks would have to adjust” because “they would lose a stream of income from payments.”

Bailey, governor of the English central bank, also referred to the “growth of the world of crypto assets”, which he criticized for “not having support” and which he considered as “a potential threat to financial stability” in the future.

For that reason, Bailey considered that a digital currency issued by a central bank may be a better alternative to a world in which cryptocurrencies and stablecoins replaced money as we know it today.



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