By Leika Kihara and Takahiko Wada
TOKYO (Reuters) – China’s progress toward issuing a central bank digital currency (CBDC) will have a huge impact on how quickly advanced economies follow suit, former top Japanese financial regulator Toshihide Endo told Reuters.
Central banks have accelerated efforts to develop digital currencies to modernise financial systems. The People’s Bank of China is leading after launching trials, whereas the Bank of Japan (BOJ) only began its CBDC project in April.
U.S. officials on Monday voiced scepticism about CBDCs, yet Endo said such caution may change if the world’s second-largest economy introduces one.
“It would be a move hard to ignore for other nations. Japan and other advanced nations will face the tough question of how quickly they should follow,” said Endo, who retains close ties with FSA and BOJ officials.
As FSA commissioner, Endo oversaw a range of regulation including for banks and digital currencies.
Endo said the FSA and BOJ have scope to strengthen cooperation, such as by reducing areas of overlap in inspections conducted separately on commercial banks.
Climate change is also an area the two entities must address, in coordination with the private sector, he said.
The BOJ this month said it would boost funding for fighting climate change with a scheme to incentivise banks to lend to firms or projects that help society become greener.
“When there is so much uncertainty, authorities shouldn’t impose rules too hastily. The process may be bumpy, but it’s best if the private sector takes the lead in creating a de-facto standard.”
(Reporting by Leika Kihara and Takahiko Wada; Editing by Christopher Cushing)