China’s progress toward issuing a central bank digital currency (CBDC) will have a huge impact on how quickly advanced economies follow suit, former top Japanese financial regulator Toshihide Endo told Reuters.

Central banks have accelerated efforts to develop digital currencies to modernise financial systems. The People’s Bank of China is leading after launching trials, whereas the Bank of Japan (BOJ) only began its CBDC project in April.   U.S. officials on Monday voiced scepticism about CBDCs, yet Endo said such caution may change if the world’s second-largest economy introduces one.

“If it launches a CBDC, China will be armed with huge social infrastructure,” Endo, who was Financial Services Agency (FSA) commissioner until 2020, said on Monday.  “It would be a move hard to ignore for other nations. Japan and other advanced nations will face the tough question of how quickly they should follow,” said Endo, who retains close ties with FSA and BOJ officials.

As FSA commissioner, Endo oversaw a range of regulation including for banks and digital currencies.  He also worked with the BOJ in prodding regional banks to streamline to weather headwind such as the profit hit from prolonged ultra-low interest rates.  Endo said the FSA and BOJ have scope to strengthen cooperation, such as by reducing areas of overlap in inspections conducted separately on commercial banks.

Source: Reuters news