Coining it

January 2026 | Deep Dive

FCCJ Deep Dive panelists explain the complex world of cryptocurrencies in Japan and beyond

How long before we all cease using yen notes and dollar bills, or euro and pound coins, and turn exclusively to our digital wallets to finance everyday domestic transactions? And how long before we can send money to or receive funds from overseas destinations in the blink of an eye and at virtually no cost?

The first part of this revolution is already underway in some advanced and emerging economies. But digital currency has yet to take on a meaningful role in international transactions. That said, it appears to be only a matter of time before cryptocurrencies such as Bitcoin and stablecoins such as Tether, as well as Central Bank Digital Currencies (CBDCs), replace the "fiat" currencies that we are all familiar with.

Panelists at a recent FCCJ Deep Dive attempted to address at least some of these developments, which could revolutionise monetary and financial transactions. The consensus was that this transformation is an inevitability, although it will not happen overnight.

Harvard scholar Paul Sheard, former Bank of Japan Policy Board member Sayuri Shirai, and former senior IMF official and senior fellow at the Atlantic Council Hung Tran attempted to clarify the distinction between cryptocurrencies and crypto assets, which are used mainly for investment.

“We are living through a period of incredible innovation with the emergence of the digital economy and the innovations that have been taking place in the cryptocurrency space - decentralized finance (DeFi), fintech, financial high tech, and so on," Sheard said. As with AI, these innovations have the potential to do both good and harm.

The upside will be much speedier and cheaper domestic and international financial transactions that benefit consumers and investors, while also improving business and economic efficiency. The downside is that the digitalization of finance could compromise security by facilitating money laundering and interfere with domestic monetary policy.

Despite the coming monetary revolution involving cryptocurrencies, public interest still centers on instruments such as Bitcoin and its myriad imitators, whose huge and volatile price swings attract regular headlines. These are not currencies, however, but "risk assets”.

“We hear reference to Bitcoin as cryptocurrency, [but] this is not correct because Bitcoin is not a currency,” Tran said. “It is a crypto asset, which is an instrument really for speculation by investors. There's no intrinsic value behind Bitcoin, no one to control it. It is basically at the mercy of miners who are willing to expend huge amounts of computer power to validate transactions by all the users of the Bitcoin system. It is not really suitable as a means of payment or a store of value."

The Deep Dive focused on developments beyond Bitcoin that are accelerating in the U.S. and  China, Japan and Europe, where the battle for currency denomination is heating up via the issue of "stablecoins" – private sector cryptocurrencies backed by legal tender, and also via central bank digital coins (CBDCs).

Pilot programmes in the use of stablecoins - a form of private money issued by financial and business entities - are spreading across the Asia-Pacific. Interest is also growing in CBDCs, with this region now the center of innovation in digital payments, Tobias Adrian, Director of the Monetary and Capital Markets Department at the IMF, explained at a seminar in Tokyo in November.

Bitcoin and other crypto instruments debuted in 2009, with innovators seeking to bypass the existing system of sovereign currencies due to their mistrust of governments and central banks, as well as questions surrounding the high costs of the "legacy" monetary system. They believed they could overcome those obstacles by using blockchain technology to enable fast and cheap financial transactions, rather than the clunky system of bank-to-bank exchanges.

But holders of Bitcoin and similar crypto assets have found that the value of these instruments can be wildly volatile, even though their restricted issuance seemed to promise stability. Stablecoins linked on a one-to-one basis to collateral holdings of U.S. dollar and other sovereign securities by their issuers seemed to provide an answer, even if they shifted control of monetary policy from official authorities to corporate and financial entities.

The fact that stablecoin holdings could be moved more or less freely across national borders via blockchain transactions alarmed not only governments but also central banks, which responded by devising central bank digital coins. These are direct liabilities of the issuing central bank and therefore safe, at least in theory. These various crypto instruments, or "tokens", are now battling with the legacy currency system for dominance.

The politics of this have extended into the long-running battle for supremacy among major currencies, including the dollar, the euro and to a lesser extent the Chinese yuan and the yen. President Donald Trump is promoting, via legislation and his own business activities, the development of dollar-backed stablecoins to ensure the continued international dominance of the U.S. currency.

In Europe, nine leading banks have joined forces to launch a  euro-denominated stablecoin, according to a recent report by ING Bank, which said that "this digital payment instrument, leveraging blockchain technology, aims to become a trusted European payment standard in the digital ecosystem”.

Apparently fearing the premature internationalisation of the renminbi, China is taking a cautious stance on stablecoin issuance, while observing experiments in this area by Hong Kong and Singapore. Japan, too, is restricting its launch of cryptocurrencies to the domestic arena, at least for now, Shirai said, adding that the country did not currently envisage a cross-border role.

In November the Financial Services Agency said it would support a pilot project by three major banks – MUFG Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank – to jointly issue stablecoins. That came shortly after the Japan-based tech startup company JPYC announced it would launch Japan's first yen-backed stablecoin.

CBDCs are a “new form of electronic central bank money issued as a direct liability of the central bank, denominated in legal tender of each jurisdiction", according to the Bank of Japan. Many economies have been studying retail CBDCs for individual and business users. Large economies have yet to make a decision on issuing CBDCs, and research is ongoing. "Stablecoins are on the rise in global finance, promising to facilitate faster and cheaper payments and to lead a wave of financial innovation”, according to a recent study commissioned by Project  Syndicate, a group of more than 500 media outlets.

At innovation in cryptocurrencies accelerates, concern is growing over the wider implications this will have for the global balance of currency power and for sovereign control over monetary and fiscal policy.

"Financial stability risks are mounting as crypto assets, including stablecoins, go mainstream, buoyed by forceful U.S. policy measures," the European Systemic Risk Board said in a report in October. "By mid-2025, the crypto asset market had reached record valuations, largely driven by U.S. pro-crypto policies aimed at boosting demand for U.S. Treasuries and reinforcing the dollar’s dominance."

Growing links between the crypto and financial sectors should be closely monitored, the paper added, citing possible "financial stability risks from stablecoins". Stablecoins, it said, raise concerns about spillover risks due to their rapid growth, their steadily increasing ties to traditional finance through backing assets, and the risks associated with a potential growing role in payment systems.

Anthony Rowley is a columnist and contributor for the South China Morning Post.