A private initiative made up of the leading big banks, around 70 companies and local governments is promoting its own digital currency.
(Photo: AP)
Tokyo Japan could introduce its own digital currency as early as next year. This emerges from the white paper “Digital Currency DCJPY”, which a private initiative from the leading big banks as well as around 70 companies and local governments presented in Tokyo on Wednesday. JPY is the abbreviation for Japan’s currency, the Japanese yen.
In the Japanese fiscal year that runs until March, the participants want to test a digital currency that is programmable and stable in value by being covered by savings deposits. The coin is minted by withdrawing it from the bank account. The central government supports the approach: the Bank of Japan, the financial supervision and the ministries of finance, economy and home affairs act as observers.
With this joint initiative by the private sector, Japan stands out in a global comparison: In other countries, cyber currencies such as Bitcoin are trying to overturn global payment transactions from below, while central banks are working on their own virtual currencies in order to maintain control over financial transactions.
Bitcoin, Ether and Co. were originally founded as a decentralized payment system that the participants manage together. However, the underlying blockchain technology now also enables the execution of so-called smart contracts. This means that, for example, transfers in the crypto world can be linked to the fulfillment of certain conditions and then made automatically. Smart contracts are of great importance for current trends in the crypto world such as decentralized finance (Defi) – this is the umbrella term for financial transactions without banks, brokers or stock exchanges.
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The Japanese initiators are now looking for a middle ground: On the one hand, they are trying to create a virtual coin that really is a means of payment. This is hardly the case with Bitcoin and Co. because the price fluctuates very strongly and transactions sometimes take a long time. Many established cryptocurrencies have therefore turned into speculative investments. On the other hand, through early, loosely regulated experimentation with the new currency, the government secures its own financial institutions a competitive advantage in the global financial market revolution.
DCJPY is designed to advance the economy and society
At the same time, the government wants to curb the proliferation of digital currencies and electronic payment systems – including various forms of money-cash cards that can be topped up with cash or credit cards. The most widespread is the Suica from the railway company JR, which has changed from a digital ticket to a digital payment system.
The aim of the initiative is to build a bridge between these systems and to advance the digitization of the economy and society. How this should be done in individual economic sectors is discussed by the participants in eleven committees.
The participants have already decided to create a digital currency based on three pillars:
- The “common area” will be a structure that will share all participating digital currencies and enable switching to the DCJPY.
- In addition, there is a business process area where the DCJPY can be programmed for many business purposes. This opens up new possibilities: Using smart contracts, automatic payments can be linked to certain conditions or triggers.
- In addition, the initiators want to stabilize the value of the currency by backing it with real values. In order to promote the dissemination, the forum decided that the banks should issue the new money and treat them as liabilities similar to deposits. “This is based on the fact that the safety and creditworthiness of bank deposits are guaranteed by regulation, supervision and deposit insurance,” explain the participants. They hope that individuals and companies will quickly put their trust in the new money.
More: Decentralized networks: crypto revolution in the financial markets.