G7 countries were warned by a senior Bank of Japan official (BOJ) that there must be a common framework to regulate digital currencies.
G7 is the Group of Seven, an intergovernmental political forum that includes Canada, France and Germany as well as Japan, Italy, Japan, Canada, France and the United States.
This statement is in response to Russia’s ongoing conflict with Ukraine. As cryptocurrencies and potential uses for economic sanctions evasion fall under increasing scrutiny, the statement was made.
Kazushige Kamiyama (head of the BOJ’s payment systems department) told Reuters that stablecoins make it easy to “create an independent global settlement system.” This would allow nation states to evade traditional and regulated payment methods that use the U.S. Dollar, Euro, or yen as settlement.
Kamiyama stated that it is essential for the G7 countries to act quickly to regulate digital assets and cryptocurrencies. Current regulations don’t fully account their increasing adoption and proliferation around the globe.
Kamiyama said that the new regulatory framework would have an impact on the design of Japan’s digital currency (CBDC), the digital Yen. It would be necessary to balance privacy concerns with money laundering and other white collar crimes.
Haruhiko Kuroda (the governor of the BOJ) announced that Japan’s FIN/SUM Fintech Summit on March 29th did not intend to introduce a CBDC any time soon. Kuroda stated that the BOJ will carefully examine the roles of central bank money within the lives of Japanese citizens.
“We believe it is important to be prepared to respond to any changes in circumstances in a timely manner. This is from the point of ensuring stability and efficiency in the overall payment- and settlement systems.”
Related: A former BOJ official warns against the use of the digital yen within financial services
Kuroda’s comments come four days after the BOJ declared that it will move onto phase two to test the viability and feasibility of a Japanese CBDC. The second phase is due to start this month. Any new regulations adopted by the G7 will also have an impact on this process.
Kuroda stated that Japan’s decision to issue CBDC will likely be made in 2026 depending on how fast CBDC adoption happens around the globe.