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Central bank digital currencies to be raised at next G-7 summit

TOKYO (Kyodo) -- The Group of Seven industrialized nations will discuss central bank digital currencies at their next summit with an eye to possible future issuance, sources close to the matter said Monday.

    The G-7 leaders will take up the matter at their meeting in the United States scheduled in late August or early September, sharing potential problems and their knowledge related to virtual currencies issued by central banks.

    The move comes as China is set to take the lead in issuing such a currency after its central bank said in January it is progressing "smoothly" with the development of a government-backed digital currency.

    The digital currency to be issued by the People's Bank of China could lead to wider global use of the yuan, a move possibly perceived as a challenge against the U.S. dollar regime.

    Central bank digital currencies could provide settlements at any place at a lower cost than digital settlements offered by private companies, which charge commissions from retailers and are not necessarily available at any shops.

    One of the sources said Japan proposed the idea to discuss the matter at the summit and the United States, the chair of the G-7 this year, is willing to do so.

    A range of questions have been raised as to digital currencies. They could be used for money laundering, while some are concerned about the issuer exclusively obtaining an enormous amount of information on individuals including purchase history.

    Last year, the G-7 nations involving Britain, Canada, France, Germany, Italy, Japan and the United States plus the European Union, called for ensuring "the highest standards of financial regulation" over Facebook Inc.'s proposed digital currency Libra to prevent potential money laundering, terrorist financing and other unlawful activity.

    The Bank of Japan, the European Central Bank, the Bank of England and other central banks, earlier this year launched a group to share information related to the potential adoption of digital currencies. The U.S. central bank is not included in the group.

    The Group of 20 major economies including China and other emerging states have already accepted plans to issue digital currencies by both public and private sectors and will start discussions in October on regulations to prevent fraudulent transactions such as money laundering.

    Meanwhile, the Bank of Japan said Monday it has set up a new division to expedite research into possible issuance of a digital currency.

    The "digital currency group" under the Payment and Settlement Systems Department with a staff of about 10 will be headed by Akio Okuno, a senior official at the department. The group takes over from a digital currency research team set up in February.

    The new division will be also in charge of the joint digital currency research with other major central banks including the European Central Bank and the Bank of England.

    The establishment follows the Cabinet's approval on Friday of an annual economic policy guideline saying that the BOJ will conduct a feasibility study on digital currencies in collaboration with other countries.

    The BOJ has said it does not currently plan to issue its own digital currency, but has not ruled out the possibility in the future.

    In the private sector, three Japanese megabanks -- Mizuho Bank, MUFG Bank and Sumitomo Mitsui Banking Corp. -- and companies including East Japan Railway Co. and KDDI Corp. set up a consortium in June to study interoperable electric money and digital currency.

    The BOJ and some government organizations including the Financial Services Agency are participating as observers.

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