Japan is stepping up its efforts to regulate digital currencies globally, three official sources told Reuters, a sign of the Japanese government’s growing concern that the proliferation of new forms of private money could jeopardize the financial system.
Tokyo is catching up on a global debate among financial regulators to set stricter rules on private digital currencies.
The regulators of the industrial powers of the G7 and the large economies of the G20 have called for greater regulation of “stablecoins” or stable cryptocurrencies, a form of cryptocurrency that is usually linked to a national currency.
To deepen the dialogue with its counterparts, Japan’s Financial Services Agency (FSA) created a section last week to oversee the regulation of digital currencies, while the Ministry of Finance is studying the possibility to increase the staff, said official sources on condition of anonymity due to the sensitivity of the matter.
“Japan cannot continue to leave things unattended with the global evolution of digital currencies advancing so rapidly,” said one of the sources.
This move by state agencies adds to the efforts of the Bank of Japan, which is experimenting with various ideas to issue a digital yen that it believes could serve as a more secure alternative to private means of transaction.
Global regulators are concerned about the growing presence of high-tech retail payment platform operators that are not regulated by traditional banking rules. If they offer multiple means of payment with private digital currencies, that would erode the control that regulators have over financial regulation.
The Bank of England stated last month that stable crypto payments should be regulated in the same way as bank-managed payments if they start to be used widely. The head of the United States Federal Reserve, Jerome Powell, has also called for greater regulation, warning that cryptocurrencies pose risks to financial stability.