TOKYO: Toshihide Endo, a former senior Japanese financial regulator, told Reuters that China’s progress toward establishing a central bank digital currency (CBDC) will have a significant impact on how swiftly advanced economies follow suit. To modernize financial institutions, central banks have escalated attempts to produce digital currencies. After commencing trials, the People’s Bank of China has taken the lead, whereas the Bank of Japan (BOJ) only started its CBDC project in April.
Officials in the United States expressed skepticism about CBDCs on Monday, but Endo believes this will change if the world’s second-largest economy adopts one.
Endo, who was the commissioner of the Financial Services Agency (FSA) until 2020, stated on Monday that if China creates a CBDC, it will be armed with massive social infrastructure.
“Other countries would find it difficult to ignore such a move. Japan and other advanced countries would have to decide how soon they should follow suit “Endo, who maintains tight relations with FSA and BOJ officials, acknowledged as much. Endo managed a variety of regulations as commissioner of the Financial Services Authority, including banks and digital currencies.
He also collaborated with the Bank of Japan in pressuring regional banks to simplify in order to weather headwinds such as the loss of profit due to extended ultra-low interest rates.
Endo believes the FSA and BOJ may improve their cooperation by decreasing overlap in inspections of commercial banks done independently.
Climate change is another issue that the two bodies must confront, he said, in collaboration with the business sector.
The Bank of Japan said this month that it will increase funding for combating climate change through a scheme that encourages banks to lend to companies or projects that help society become more environmentally friendly.
To avoid interfering with government policy, the BOJ has stated that the decision on whether loans are considered green will be left to private banks.
“By providing the private sector discretion over whether loans are green, the BOJ is taking the proper approach,” said Endo, who is presently a senior advisor at Sony Group Corp.
“Authorities should not enforce rules too quickly when there is so much ambiguity. Although the road ahead may be rocky, it is ideal if the private sector takes the lead in establishing a de facto standard.” (Leika Kihara and Takahiko Wada contributed reporting; Christopher Cushing edited the piece.)
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