Japan's Finance Minister: China's central bank digital currency could pose great risks

Japanese Finance Minister Taro Aso believes China’s central bank digital currency could pose significant risks, according to Bloomberg.

He reportedly warned countries not to use China's digital yuan, arguing that any country needs to do a lot of work before issuing a central bank digital currency.

“Central bank digital currencies carry great risks unless they are properly regulated,” Aso said in Riyadh, the Saudi capital where the G20 meeting is being held. “At least for now, I would say ‘hold off’ on issuing government-backed digital currencies.”

According to a G20 communique released on Sunday, risks associated with digital currencies should be assessed and appropriately addressed before issuance. China's central bank digital currency plan and Facebook's efforts to launch its private Libra stablecoin are pushing central banks around the world to accelerate their understanding of the functions of digital currencies and their impact.

Taro Aso believes that countries should be aware of the chaos that may be caused to the global economy if China abandons its digital currency in the future.

The Bank of Japan is currently working with other major central banks to evaluate developing its own digital currency. Although Japan has no current plans to issue a digital currency, lawmakers are increasingly concerned that the digital yuan being developed by Chinese authorities could destabilize the dollar-centric economic order.

Norihiro Nakayama, a senior lawmaker from Japan's ruling party, previously said, "We believe that the digital RMB poses a challenge to the existing global reserve currency system and monetary hegemony."

Widespread use of the digital yuan could lead to more currency transactions, expanding its sphere of influence while potentially weakening the position of the yen.

Japan remains more cash-dependent than most other developed countries, a situation the government is trying to change by offering rebates for purchases made with credit cards or other electronic methods. Cashless payments accounted for less than 20 percent of all transactions in Japan in 2016, compared with 65.8 percent in China, according to a government report released last month.

Image source: pixabay

AuthorLiang CHE

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