Adopting central bank crypto to mean dropping cash: BoJ

TOKYO: An official at the Bank of Japan (BoJ) has ruled out the use of central bank digital currencies because to do so may require the country to abandon cash.

According to a report by Reuters, Masayoshi Amamiya, deputy governor of the Japanese central bank, on Friday cast shade on the notion that central banks could make negative interest rate policies more effective by issuing their own digital currencies (CBDCs).

The issue comes down to the fact that, if the BoJ issues a digital yen and set a negative interest rate, individuals and businesses would effectively be charged for holding the CBDC. As a result, he argued, holders would drop the digital coin and instead hold cash.

“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.”

Back in April 2018, Amamiya also said the BoJ had no plans to issue a CBDC directly for consumers because it could undermine the existing two-tiered system and affect financial stability.

Currently central banks only give access to limited entities such as private banks, which face consumers directly in a second tier. Launching a digital currency backed by the central bank would change the system without proving to be financially stable, he argued.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

With the supply of new coins to be halved in less than five weeks, litecoin is outpacing its peers.

The fourth-largest cryptocurrency by market capitalization is currently trading at $123, representing 5 percent gains on a seven-day basis, according to data source CoinMarketCap.

Litecoin’s recent relatively shining performance could be associated with the mining reward halving due on Aug. 6 this year.

The process is aimed at curbing inflation by reducing the coins paid out for mining on litecoin’s blockchain by half. So, after Aug. 6, miners will get 12.5 coins for every block mined – down 50 percent from the current reward of 25 coins.

Essentially, miners will be adding fewer coins to the ecosystem, likely leading to less in circulation. The impending supply cut might have helped LTC outperform its peers in the last seven days.

While it is logical to expect the cryptocurrency to rise further in the run-up to the event, the upside looks limited. After all, LTC has already witnessed phenomenal growth in both price and non-price metrics so far this year, and is currently up more than 300 percent on a year-to-date basis.

Meanwhile, litecoin’s hash rate, or computing power dedicated to mining, rose to a record high of 468.1019 TH/s this week. Notably, the metric is currently up 220 percent from the low of 146.2118 TH/s seen in December.

All-in-all, the market may have largely priced in the reward halving already. In fact, if history is a guide, the probability of LTC witnessing a sharp pullback in the run-up to the Aug. 6 event is high.

It is worth noting that LTC had nosedived from $8.72 to $2.55 in 6.5-weeks leading up to the previous reward halving, which took place on Aug. 25, 2015.

Technical charts are also signaling scope for a near-term price drop.