Image via Danny Choo/Flickr CC
The Bank of Japan is backing a scheme that could see the country change how it transacts. Forecast to be up and running in time for the 2020 Olympics, the Japanese digital currency, J Coin, will provide banks with more accurate data on spending patterns, writes FXTM’s Research Analyst, Lukman Otunuga.
News broke this week that a consortium of Japanese banks are currently working on a new cryptocurrency. The project is being spearheaded by Japan Post Bank and Mizuho Financial Group. A Mizuho spokesperson was quoted on Wednesday hinting that the project was “still in its early stages”, and went on to confirm that the initiative had yet to be approved by regulators.
If J Coin is implemented, it will mean a significant change for a nation that conducts nearly three quarters of all financial transactions in cash. Initial reports suggest that J Coin will be pegged to JPY, convertible on a one-to-one basis, and accessible via a smartphone app. QR codes in shops will allow customers to transfer money at point-of-sale and, most crucially of all, the service will be free to both merchants and consumers. Banks in the consortium are offsetting development costs with increased access to data on consumer spending.
And why not? Big Data is big business. An accurate, comprehensive overview of how consumers are spending their money has applications that range from enhancing national security to increasing marketing engagement. An individual’s spending habits allow almost every aspect of their life to be tracked, from meal preferences to travel aspirations and pivotal life decisions. A cashless world is in equal measure thrilling and terrifying.
For the moment, the J Coin initiative is simply a showcase of Japan’s increasing FinTech capabilities. Current estimates suggest the value of the cryptocurrency to the Japanese economy could be as much as JPY 10billion. This figure is largely based on the reduction in settling, handling and transportation costs associated with hard currency transactions. Rolling it out in time for the 2020 Olympics would also offer additional benefits, not least of which is increased access to local currency for the hundreds of thousands of tourists expected to visit the games.
Looking beyond the Olympics, a nation-wide roll out of J Coin has the potential to speed up transaction times, reduce associated costs, and assist those who struggle to connect with traditional banking services. How the cryptocurrency will be introduced into circulation has yet to be determined, but regulatory issues are unlikely to pose a problem. The Japanese government have traditionally viewed cryptocurrencies favourably, legalising Bitcoin as an official payment method earlier this year. Whether Japan’s security-conscious, cash-dependant population will be quite so welcoming remains to be seen, but the country’s latest inclusive, open initiative certainly signals the start of a new era for banking.
For more information please visit FXTM at www.forextime.com