Japan is beefing up its efforts to regulate digital currency as said by three officials to Reuters in an interview. This is a sign that the government’s worry for the escalation of private money could upend the financial system.
Regulators from the Group of Seven industrial powers and 20 big economies have called for greater regulation of “stablecoins”. Experts also say a lack of transparency is making cryptocurrencies a useful tool for money laundering and tax evasion.
Japan’s Financial Services Agency (FSA) last week established a section to oversee digital currency regulation, to deepen the dialogue with their counterparts. While the Ministry of Finance is considering increasing staff, the officials said “Japan can no longer leave things unattended with global developments over digital currencies moving so rapidly,” anonymously.
This move complements BOJ’s idea of issuing a digital yen that would serve as a safer alternative.
The new unit at Japan’s FSA, launched on July 8, also aims to oversee “decentralized finance”, the officials said. The agency created a new position to head the section.
The finance ministry is considering increasing headcount at an existing division to ramp up digital currency oversight. The ministry will submit a budget request by August.
Stablecoins are cryptocurrencies designed to have a stable value relative to traditional currencies or to a commodity such as gold. Stablecoins designed to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.
No stablecoins have gained traction in day-to-day commerce. However, in 2019 Facebook proposed the creation of digital currency for use on its platforms, alarmed global financial regulators.
Authorities in Tokyo have been stepping up coordination on digital currency research and prospects for issuing a central bank digital currency. The BOJ in March created a committee bringing together MOF and FSA officials, as well as lobbyists from the banking and finance sector, to share information on such a currency.Global regulators worry about the increasing presence of bit-tech retail settlement platforms outside the regulation of traditional banking rules. US federal reserve chief Jerom Powell also called for strict regulation, warning that cryptocurrencies pose a risk to financial stability.