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Bank Of Japan To Research Impact Of Blockchain Technology On Financial Market Infrastructure
Blockchain technology that underpins digital currencies such as bitcoin continues to garner attention across multiple industries and sectors. Central banks are also gradually warming up to this novel technology and realizing its potential.
Hiroshi Nakaso, Deputy Governor of the Bank of Japan, in his recent remarks at the Conference on Retail Payments discussed “Central Bank Policy on Financial Market Infrastructure”, including payment and settlement systems, in light of innovations in information technology that have brought about various innovations in payments.
“In line with development of information technology and various financial innovations, which are often referred to as “FinTech”, the frontier of the policies related to FMIs is rapidly expanding, and has become a major policy field that could be called “financial market infrastructure policy (FMI policy)” for central banks around the world”, Nakaso said.
He noted that traditional financial infrastructure is built around “centralized ledgers”, adding that blockchain and distributed ledger technologies are considered as enabling to keep ledgers in a de-centralized manner without relying on trusted third parties to manage ledgers.
“Owing to such characteristics, blockchain and distributed ledger have attracted considerable attention, since international forums are focusing on their potential to be applied to wide-ranging businesses and practices. The application of those technologies would also change the structure of the financial infrastructure that has been built around centralized ledgers managed by trusted third parties. Thus, central banks will and have to follow these issues closely and with great interest”, Nakaso added.
While some central banks have recently suggested the possibility of issuing digital currencies, Nakaso clarified:
“[T]he Bank [BoJ] does not have a specific plan to issue digital currencies at this stage, but will deepen its research and analytical activities so as to understand the impact of technological innovations, FinTech and distributed ledger on financial architectures and FMIs while keeping all options open, including the possibility of the Bank’s utilizing such advanced technologies in its own operations in future”.