Bank of Japan Deputy Governor: Widespread use of digital currencies such as Bitcoin will have a significant impact on regulatory and taxation policies

A senior official at Japan’s central bank said on Monday that the increased use of digital currencies and distributed ledgers could have implications for regulatory and monetary policy.

In a speech at a financial technology event at the University of Tokyo, Bank of Japan Deputy Governor Hiroshi Nakaso discussed the benefits and risks of increased digitalization of financial services. In particular, he noted that the use of distributed ledgers could lead to confusion among regulators over how electronic ledgers are maintained.

He told attendees:

“As financial technology drives economic transactions through the internet, smartphones and enterprise applications of distributed ledger technology (DLT), it will become increasingly difficult to identify where transactions take place and where the physical ‘location’ of transaction ledgers is stored. This will lead to problems in all areas, including regulation and taxation.”

Nakaso commented on the technology in August, speculating that it could reshape some functions in the financial sector.

During the Tokyo event, Nakaso hinted that if these digital currencies gain widespread use among consumers, they could affect how central banks conduct monetary policy.

“Indeed, if virtual currencies, such as Bitcoin, are widely used directly to purchase goods and services, then this will naturally have an impact on our monetary policy. However, the current consensus view in various international forums is that virtual currencies are unlikely to overwhelm sovereign currencies.”

Nakaso concluded his speech by calling for greater collaboration among stakeholders in the financial technology space.

He said:

“To overcome these problems, we need to collaborate with a wide range of entities, especially private industry and academics.”