There was a time when cryptocurrencies were ridiculed as just a ‘speculative financial asset’ by the banking elite. Now, a decade in, they are considered crucial for shaping economic policies in several places.
Masayoshi Amamiya, Deputy Governor of the Bank of Japan [BoJ], stated that digital currencies cannot be used to boost the effect of Japan’s negative interest rates, reported Reuters on July 5.
Don’t be jumping off your seats just yet though. Amamiya is referring to the prospects, or lack thereof, of a digital asset which is equivalent to the yen, rather than a full-fledged decentralized currency that is still a pipe dream for the cryptocurrency community.
He specifically stated that if the BoJ opts to supply sovereign currency in digital form with the pretext of negative interest rates, cash would be benefited. Households and corporates will begin hoarding cash in order to avoid charges for holding digital currencies.
“To overcome the nominal zero lower bound, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”
Adding digital currencies in the mix is merely a ‘nudge’ to the larger macro-economic policy of negative-interest rates, rather than taking a page from the principles of the cryptocurrency world.
Japan began employing the use of ‘negative interest rates’ back in 2016, prompting citizens to deposit their funds in bank accounts, thereby earning interest. The BoJ introduced this to boost the economy, as the saved cash could be put to better use and be loaned out to households and corporates.
The European Central Bank heralded this economic policy in 2014, with other non-Eurozone members like Denmark, Switzerland, and Sweden also introducing negative interest rates.