Japanese Minister of Finance Taro Aso warned the world off China’s digital yuan, saying that more work is needed before any issuance.
China is expected to introduce the currency later this year, and Japanese officials have repeatedly expressed reservations about such a move.
“There is a big risk in a central bank digital currency unless the regulation is well-sorted,” Aso told reporters in Riyadh, where G20 finance ministers held a meeting over the weekend.
“I would say ‘hold on’ for the issuance of a government-backed digital currency, at least for now,” he said.
The G20 communique said on Sunday that risks associated with a digital currency should be evaluated and appropriately addressed before its issuance.
China’s plan and Facebook Inc’s efforts to launch its own Libra currency have sparked central banks around the world to get up to speed on how digital currencies would function and what their effects could be.
Aso said nations should be aware of the risk of China suddenly ditching its digital currency and causing a chaos in the global economy.
The Bank of Japan (BOJ) is teaming up with other major central banks to assess potentially developing their own digital currencies.
While Japan has no plan to issue a digital currency, concerns are growing among lawmakers that a digital yuan being proposed by Chinese authorities could destabilize an economic order that has been revolving around the US dollar.
“We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony,” Norihiro Nakayama, a senior lawmaker in Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party, told Bloomberg this month.
The wide use of a digital yuan could lead to more trading in the currency, while possibly crippling the yen’s status.
Japan still relies more heavily on cash than most other developed nations, a situation the government is trying to change by offering shopping rebates on purchases made with credit cards or by other electronic means. Cashless payments accounted for fewer than 20 percent of all transactions in 2016, compared with 65.8 percent in China, a government report said last month.
Separately on Sunday, BOJ Governor Haruhiko Kuroda said the bank would be “well-prepared” to act when needed to address the impact of the COVID-19 outbreak on the economy.
“We will monitor the impact of the coronavirus on the economy, inflation and financial markets with maximum attention,” Kuroda told reporters in Riyadh.
“We will continue to gather information by attending international meetings like the G20 and we will be well-prepared to act when we need to act,” he said.
Kuroda said he does not expect a “big delay” in the recovery of the Japanese economy for now.
The BOJ is not at a stage to discuss the specifics of a potential monetary policy response, he said.
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