The Group of Seven, popularly known as the G7 has been warned by an official of the Bank of Japan(BOJ) regarding the ambiguity in the regulation of crypto, which can be taken advantage of and used to bypass financial sanctions.
In light of the escalating Russia vs. Ukraine conflict, Kazushige Kamiyama, the head of the BOJ’s payment and settlement systems department has asked the G7 to speed up the creation of a regulatory framework regarding digital currencies, lest they be used to avoid sanctions.
The senior official says that digital currencies can be used to circumnavigate traditional payment methods which use the U.S Dollar, Yen and Euro and that the Russians might be able to evade the sanctions imposed on them using digital currencies.
“By using stablecoins, it’s not very difficult to create an individual global settlement system,” said Kazushige Kamiyama.
The official asked the G7 members to recognize the seriousness of the issue and to work fast to develop a common understanding of how to update the current rules and to take into consideration the monumental impact of cryptocurrency’s widespread adoption.
Kamiyama continued, “G7 nations are now working together on this front, while sharing information on current developments”
Japan’s Chief Cabinet Secretary Hirokazu Matsuno had also proposed a revision of Foreign Exchange and Foreign Trade Act. The revision aims to reform the law to avoid Russians skirting around the sanctions using digital currencies.
Experiments around a central bank digital currency (CBDC)-the digital yen, were announced last year and Kamiyama says that the decision taken by the G7 will affect the design process of the digital yen.
The BOJ will begin its second phase of trials of the digital yen from April, lasting a year and will check features such as whether to set a limit on the sum each entity can hold. Kamiyama also stated that a delicate balance will have to be developed between a user’s privacy and money laundering concerns.
Although BOJ governor Haruhiko Kuroda thinks that a decision regarding the CBDC will be announced by 2026, Kamiyama says that the timing will depend partly on how quickly the other banks move.
He said,” Given how so many advanced nation central banks are moving collectively, dramatically and simultaneously on CBDC, it could cause big changes in the settlement system in the future. Japan needs to make sure it’s not left behind.”