China’s Digital Yuan Won’t Topple Dollar, BOJ Official Says

A senior Bank of Japan official played down the potential for China’s digital yuan to threaten the dollar’s position as the world’s main reserve currency.

“The dollar’s status as the key global currency won’t change so easily,” said Kazushige Kamiyama, head of the BOJ’s payment systems department and the person in charge of looking into a virtual Japanese currency. “In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”

A report earlier this week showed the Biden administration is increasing its scrutiny of China’s progress toward a digital yuan amid concern it could kick off a long-term bid to displace the dollar.

The People’s Bank of China has moved closer to becoming the first major central bank to launch a virtual currency, rolling out a trial for consumers and businesses in cities across the country.

The PBOC has been working on a digital currency since 2014 and its moves have heightened interest among central banks and policy makers, while the spread of cryptocurrencies has added to a sense that competitors to regular cash could change how the financial sector operates.

The pandemic has also accelerated the use of cashless payments, even in Japan where banknotes and coins are still used in a majority of transactions.

Kamiyama said the BOJ had no specific plans for a pilot test at this point, but he denied that the central bank was lagging its peers.

“The BOJ isn’t behind” in the study of a digital currency, Kamiyama said.

The BOJ started the first phase of its own technical experiments on digital currencies last week and is participating in group studies on them with the Bank for International Settlements and six major central banks including the Federal Reserve and the European Central Bank.

The group in October said the introduction of digital currencies shouldn’t undermine the stability of the current financial system.

“No single digital currency from a central bank is likely to conquer the world as long as everyone continues to work on improving their settlement systems,” Kamiyama said.