Japanese Banks Launching Digital Currencies Could Inspire the Traditional Cash Society

Even though Japan has played host to some of the biggest crypto hacks to date, they are still mostly a cash-based society where about 65 percent of transactions are done in cash and, perhaps because of this, the Bank of Japan has repeatedly stated that they see no need or demand for a central bank-issued digital currency and that it is not an effective economic tool.

Despite these supposedly adverse sentiments, several banks in Japan are actually launching their own digital currencies.

Mizuho Financial GroupThe Mizuho Financial Group announced in December 2018 that they will be issuing their own digital currency in March 2019.

The digital currency will be the first to be issued by a megabank and will enable users to make cashless payments with their smartphones, as well as allowing free cash transfers between users.

Under the J-Coin project, the digital currency will be fixed 1:1 to the Japanese yen to reduce volatility, and the commission that shops have to pay credit card companies will be kept low.

Dan Doney, the CEO of Securrency - a financial technology solutions provider that creates interoperability among blockchains and legacy systems with associated Decentralized Investment Banking Services - said that the Bitcoin bond "Brings digital currencies into the world of high finance" but that it is very difficult to predict the price of Bitcoin tomorrow, let alone a year from now, and that this is what remains a major challenge.

According to analysts, a Bitcoin-backed bond would allow large institutions to store value using the digital currency, potentially making them more open to accepting Bitcoin as a payment method, and derivative instruments generally allow a more liquid market, reduced volatility and better price discovery.

Across the globeJapan is not alone when it comes to banks launching digital currencies.

The phenomenon has been observed across the globe, with several local and central banks either piloting or considering the issuance of their own digital tokens, including Russia, England, Thailand, Venezuela, Norway, Sweden, the Bahamas and Lithuania, to name a few.

The application of bank-backed digital currencies becomes particularly interesting in a nation that is largely cash-dependent such as Japan, with the potential it has to persuade people to adopt a nontraditional, less familiar, but ultimately more cost-effective and efficient means of payment.