Crypto Must Be Regulated: Bank Of Japan

Following Russia’s attack on Ukraine, countries throughout Europe — and indeed, throughout the world — announced sanctions against Russia for acting as an aggressor. However, due to the cryptocurrency industry, which is decentralized and out of any centralized institution’s or government’s control, the question now arises: are cryptocurrencies eroding the power of sanctions?

Bank of Japan’s senior official believes that cryptos pose a major threat to economic sanctions, as they allow targeted countries to bypass the intended effect of the sanctions. As a result, Japan’s Central Bank’s official believes that G7 nations — the US, Canada, the UK, Italy, Germany, France, and Japan — need to come up with regulations for the crypto industry as soon as possible.

Stablecoins and CBDCs

While the crypto industry is still troubled by its own issues, such as scalability and volatility, BOJ’s head of payment systems department, Kazushige Kamiyama, believes that the real threat comes from stablecoins. Pegged to far more stable fiat currencies, stablecoins could be used by sanctioned nations to create new global settlement systems that are just as functional as traditional ones.

The only way to prevent this, according to Kamiyama, would be to build on current regulatory frameworks and take them to the next level. He believes that the current rules and guidelines are not adequate to handle growing crypto adoption, which has been skyrocketing around the world in recent years.

Another reason why Kamiyama believes that new regulations are necessary is the fact that Japan is in the middle of creating its own CBDC (Central Bank Digital Currency). He expects that the new regulatory framework that G7 countries could agree on may impact the design of the so-called digital yen. So, in order to be able to design it adequately, Japan’s Central Bank needs to know what rules the coin will have to abide by.

It is worth noting that Japan is not in a rush to issue its own CBDC. Japanese Central Bank officials have noted this multiple times, explaining that they first wish to conduct research and assess the necessity of a CBDC in the country and its potential impact on the lives of Japanese citizens. However, the CBDC is still in development, as the country wishes to have it ready and waiting, just in case circumstances make the introduction of a CBDC an urgent matter.

Crypto Regulations Become the Only Solution

As for the matter involving sanctions, it is also important to note that Russia is not the only country that is under sanctions and using cryptocurrencies to bypass them. Countries like Venezuela and North Korea have been looking into the crypto industry for years to circumvent the effect of sanctions on their nations.

If the situation is not addressed through regulations, the only other option might be following in China’s footsteps: fully banning the crypto industry in order to make crypto useless to the sanctioned countries. However, this is not really an option, as the crypto sector has already been adopted too broadly. The only real option would be an adequate regulatory framework that could, in theory, become a global solution.

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