The Bank of Japan has warned G7 nations that a common regulatory framework for cryptocurrencies needs to be introduced quickly, as current rules do not take into account the potential for digital assets to be used to skirt sanctions.
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A senior official from the Bank of Japan (BOJ) has warned G7 nations that a common framework for regulating digital currencies needs to be put in place as quickly as possible.
G7 refers to the Group of Seven, an inter-governmental political forum made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The statement comes in response to the continued conflict between Russia and Ukraine, as cryptocurrencies and their potential applications for skirting economic sanctions falls under increasing scrutiny.
The head of the BOJ’s payment systems department, Kazushige Kamiyama, told Reuters that using stablecoins makes it very easy to “create an individual global settlement system,” which would in turn make it easier for nation states to evade more traditional and regulated payment systems that use the U.S. dollar, euro or yen for settlement.
Kamiyama added that a sense of urgency is paramount if the G7 nations are to effectively coordinate to regulate cryptocurrencies and digital assets, as the current regulations do not fully consider their growing adoption and proliferation throughout the world.
Kamiyama added that this regulatory framework would affect the design process of Japan’s own central bank digital currency (CBDC) — the digital Yen. There would be a need to carefully balance individual privacy with concerns about money laundering and other white collar crimes.
The governor of the BOJ, Haruhiko Kuroda, announced at Japan’s FIN/SUM fintech summit on March 29 that it has no plans to introduce a CBDC anytime soon. Kuroda explained that the BOJ plans to carefully consider the expected roles of central bank money in the lives of Japanese citizens.
“We consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems.”
Related: Former BOJ official warns against use of digital yen in the financial sector
Kuroda’s remarks come just four days after the BOJ announced that it is moving onto phase two of testing the viability of a Japanese CBDC. Phase two is set to begin this month, so any new regulations decided upon by the G7 will have some impact on this process.
Kuroda said that a decision on whether to issue CBDC in Japan will most likely be reached sometime in 2026, depending on the speed at which CBDC adoption occurs throughout the rest of the world.