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Japan must amend central bank laws to issue digital yen, says official

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Japan needs to adapt its laws to issue a central bank digital currency, according to a local financial official.

Kozo Yamamoto, head of the Liberal Democratic Party’s council on financial affairs and a former official at the Ministry of Finance, believes that Japan must revise a law stipulating the Bank of Japan’s (BoJ) mandate and responsibilities regarding the development of a CBDC.

According to an Oct. 12 Reuters report, Yamamoto said that potential amendments to the BoJ law would be a good opportunity to consider other changes like adding job creation to the central bank’s mandate. The official also stated that the revised BoJ law should include provisions for inflation rates:

Like the U.S. Federal Reserve, the BOJ should set job creation and inflation as its mandate […] The new law should also clarify that 2% inflation is the BOJ’s policy target.”

Yamamoto’s remarks come shortly after the BoJ officially announced its plans to conduct a proof-of-concept for the digital yen in 2021. The announcement came as part of Japan’s central bank’s first joint report into CBDC issued on Oct. 9. Prior to this announcement, the BoJ was claiming that it had no plans to launch a CBDC in the near future.

Japan is apparently getting more serious about its own CBDC amid China’s aggressive progress with the digital yuan. On Oct. 9, the vice-finance minister for Japan’s international affairs warned the global community of the potential risks of China taking the “first-mover advantage” in issuing a CBDC.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.