Japan is one of the world leaders in technology - especially FinTech.
The country embraces Blockchain Technology and cryptocurrencies, and even accepted Bitcoin as legal payment method earlier this year. Countless large retailers and stores in Japan already accept cryptocurrencies for payments.
So it's no surprise that the Japanese Government has now decided to take the next step towards a cash-less financial system. They have realized that digital currencies are the future - and that they will grow to become an essential part of banking in the future.
Today, Japan has announced to begin eliminating cash - and introduced their new digital currency, "J-Coin".
J-Coin
The news were released in an article from the Financial Times, stating that Japan aims to "streamline the financial system" this way, and introduce a new cash-less system before the Olympic Games in Tokyo 2020.
The so-called J-Coin will be a product of cooperation between different major Japanese banks - amongst them Bank Mizuho Financial Group and Japan Post Bank. The project is also supported by the Japanese central bank.
And this comes just a few days after Japan dominated the global bitcoin exchange market with a 50.75 percent market share!
J-Coin and Japanese Yen
Instead of replacing the traditional Japanese Yen with the new J-Coin, the plan is to have both currencies function in tandem.
The J-Coin would be exchanged at a 1:1 ratio, and the exchange service itself would be free.
Although the J-Coin is planned as a digital currency, it's not quite clear yet if the system will in fact be based on Blockchain technology. The Bank of Japan recently stated that they don't consider Blockchain technology ‘mature’ enough to manage transactions in everyday life.
The currencies are then supposed to be used for payments and transfers through a mobile app.
Problems to overcome
Interestingly, the Japanese economy functions 70% on cash - this number is much larger than other developed nations where digital transactions have replaced cash.
Keeping this statistic in mind, it might be quite difficult to transition to a "cash-less" financial system in just over 2 years time. The banks in charge of the project estimate that the new digital currency could add ¥10 billion ($90 million) to the economy, which could otherwise be lost due to undocumented cash-in-hand work or black market transactions.
Another problem is the privacy - the system may be free to use for Japanese citizens, but the banks get to collect large amounts of personal data instead. The system saves the purchase behaviour of users and could use this data for their own advantage - for example to adjust the prices according to demand.
We will see how the country will adjust to the new financial system in the future, and how quickly they will be able to setup the new digital currency system!
And this isn't the only new project that introduces a new system of digital currency - other countries like Sweden, China, Estonia, Russia and Ecuador are thinking about doing the same. And even some leading banks like HSBC, Barclays, UBS, and Santander are teaming up to create the "Universal Settlement Coin", a digital currency to allow banks to trade easily with each other.
© Sirwinchester