The Bank of Japan has no plans at the moment to issue central bank digital currency, a senior official of the Bank of Japan said last week.

Speaking at the University of Tokyo - Bank of Japan Joint Conference in Tokyo on "FinTech and the Future of Money", Hiroshi Nakaso, Deputy Governor of the Bank of Japan, said that blockchain or distributed ledger technology (DLT) has the potential to significantly affect the basic infrastructure of financial activities. However, he noted that most of the current efforts toward putting DLT into practice are still at the experimental stage.

He said that while it is technically possible to imagine a “virtual bank" which uses the internet, smartphones, cloud computing, AI, and DLT to provide access to financial services, such a system might lead to taxation and regulatory problems.

“If FinTech stimulates economic transactions through the internet and smartphones as well as business applications of DLT, it might become increasingly difficult to identify the physical "location" where transactions take place and the relevant ledgers are kept. This could lead to a variety of issues including those related to regulation and taxation”, Nakaso said.

He emphasized that the central bank must appropriately adopt available technologies in order to provide the optimal core infrastructure for economic society, adding that the central bank itself must keep abreast of technological innovation.

Speaking of digital currencies, Nakaso said that with their widespread use for purchasing goods and services directly, there should be influences on monetary policy. However, he pointed out that various international forums currently believe that virtual currencies are unlikely to overwhelm sovereign currencies.

“The Bank of Japan has no specific plan at present to issue digital currencies as a substitute for banknotes. Nonetheless, the Bank will make utmost efforts to deeply understand new technologies including blockchain and DLT”, he said.

However, Nakaso said that the bank, in close cooperation with academics, will make its best effort to deepen its understanding of the issues surrounding central bank digital currency. He said that the BoJ will continue the research and analysis of new technologies, with the objective of improving its own infrastructure in the future.