M a y 16 , 202 6
B a n k o f Ja p a n
Speech at the 2026 Spring Annual Meeting of the Japan Society of Monetary Economics
HIMINO RyozoDeputy Governor of the Bank of Japan
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GENIUS Act and Digital Euro
Last year, both the United States and Europe took critical steps in the design of their monetary systems (Chart 1).
The United States enacted the GENIUS Act in July to regulate and promote stablecoins.1 An executive order in January prohibited the development and issuance of CBDC by federal agencies.
On the other hand, in October, the ECB announced plans to launch a CBDC in 2029, and the European Parliament began the relevant legislative processes. Stablecoins have been under the MiCA regulation since December 2024.
The developments in 2025 seem to show that the United States has steered itself toward stablecoins, and Europe toward CBDC, though the possibility of further twists and turns cannot be excluded.
In his statement on the enactment of the GENIUS Act, Secretary Scott Bessent of the U.S. Treasury commented that the stablecoin technology will "buttress the dollar's status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins."2 Here, stablecoins are expected to strengthen the dollar's privilege as the global key currency and attract and induce people around the world to finance the U.S. fiscal deficit.
Europe seems to have different motivations. In his speech, ECB Executive Board Member Philip Lane remarked as follows: "The benefits of a CBDC are more extensive compared to the calculus for an individual nation state with its own currency… The digital euro presents a unique opportunity to overcome the persistent fragmentation in retail payment systems across the euro area… The digital euro would also play a crucial role in strengthening the
1 Guiding and Establishing National Innovation for U.S. Stablecoins Act.
2 U.S. Department of the Treasury, "Statement from U.S. Secretary of the Treasury Scott Bessent on Enactment of the GENIUS Act," July 18, 2025.
strategic autonomy of Europe in an increasingly fragmented geopolitical landscape."3
The United States and Europe might not necessarily serve as a model for Japan to follow. Firstly, it seems that the United States and Europe are heading in different directions, limiting the room for global consensus standards to emerge. Second, unlike the dollar, the yen is not the world's key currency. Third, Japan is what Lane refers to as "an individual nation state with its own currency," and the yen is not a tool for regional integration.
Japan is prepared for both paths. Japan was the world's pioneer in introducing stablecoin legislation. The Bank of Japan is advancing its CBDC pilot program, and relevant ministries and the Bank are working to develop a CBDC design outline. Developments overseas, however, seem to suggest that work on components is not enough and that a holistic design of the future monetary system is needed.
Designing a future monetary system requires an examination from a multitude of perspectives: technical feasibility, social costs and their allocation, user convenience, resilience, compatibility with new technologies, competition and antitrust, financial stability, financial intermediation, AML-CFT, elasticity of money, monetary policy, seigniorage, and the international monetary system (Chart 2).
These points need to be assessed against various scenarios and environments. For example, stablecoin business models might not be sustainable under zero or negative interest rates.4 CBDCs may find it difficult to attract general users under unstressed conditions.5
There can be a trade-off between user convenience in normal times and resilience in times of
3 Philip R. Lane, "The digital euro: maintaining the autonomy of the monetary system," March 20, 2025. Five months after Lane's lecture, the United State imposed sanctions on judges and prosecutors of the International Criminal Court, and their Visa and Master credit cards were blocked, materially constraining their business and private activities. It seems that the incident further alerted Europeans to the geopolitical implications of payment systems.
4 In Japan, the business model of money market funds (MMFs) became unsustainable after the policy interest rate turned negative.
5 In China, the digital yuan, which had originally been issued as central bank liability, was recently recast as commercial bank deposits, allowing it to accrue interest.
crisis. In March, Sweden's Riksbank, the world's oldest central bank and a pioneer in CBDC, published new recommendations for public payment preparedness (Chart 3, left). 6 The recommendations state, "The current international situation and Sweden's high degree of digitalization may lead to vulnerabilities in the payments system. It is therefore important for the general public to ensure that they have different ways to pay, such as cash, cards and access to payment services via mobile phones. The general public is an important part of Sweden's total defense and central to strengthening national preparedness in the payments market."
The recommendations include the following points:
Keep a sum of SEK 1,000 in cash per adult at home to cover a week's worth of essential purchases.
Hold cash in several different denominations.
Use cash at regular intervals during normal times to keep the cash systems running.
Have access to at least two cards from different card networks.
Have access to payment service via mobile phone.
Have physical cards and PINs easily accessible in case mobile phone discharges or stops working.
I usually carry a fat wallet with me, stuffed with Bank of Japan notes and multiple credit cards. I often felt myself to be old-fashioned compared with the wallet-free younger generation. I also felt slightly guilty for not being well aligned with the policy of the Japanese Ministry of Economy, Trade and Industry, which promotes a cashless society. But perhaps I should take pride in my old-fashioned fat wallet, which may symbolize the emerging lifestyle of the era of geopolitical tensions.
Recently, several countries have incorporated cash into their constitutions. Slovakia, Hungary, and Slovenia enshrined the right to pay with cash in their constitutions (Chart 3, right). In March, Switzerland incorporated the central bank's provision of cash into its constitution. While at the Financial Services Agency, I once argued that fintech affects the allocation of power and control over information between the government, corporations, and individuals
6 Sveriges Riksbank, "New recommendations for public payment preparedness," March 4, 2026.
and may make society face the trilemma of inefficiency, overreach by government or big businesses, and anarchy.7 The trilemma may become particularly acute when technology meets money.
In addition, when designing a monetary system, we should think about other deeper questions as well: What is money? Why does fiat money work? Which functions of money should be preserved and promoted?
The list of issues has become too long to cover. In the following, I will focus on the issue of the singleness of money, which is closely associated with the role of central banks. This is a topic under discussion both within the Bank and in international forums, and so some of the points I make will inevitably reflect my personal views rather than the views of the Bank or the consensus among central banks.
- The Three Functions of Money
Money is said to serve three primary functions: it is a unit of account, a store of value, and a medium of exchange (Chart 4).
Of these, the unit of account function refers to the role of a unit such as the yen in measuring value and setting prices. This is an abstract function not tied to specific instruments. The Bank of Japan implements monetary policy to ensure price stability, or the stable functioning of the yen as a unit of account.
On the other hand, the store of value function requires not just the yen unit but also specific instruments to realize it, such as cash, bank deposits, bonds, stocks, and mutual funds. Each of these has its unique characteristics: holding a large amount of cash can incur storage and transportation costs, bank deposits may lose value when faced with inflation, and market prices of bonds, stocks, and mutual funds can drop. People choose instruments according to the aims to store value, ranging from weekend shopping to life after retirement.
7 On the sources of trust, see "Is Satoshi's Dream Still Relevant Today?" (2020). On the trilemma of inefficiency, government or corporate overreach, and anarchy, see "FinTech, the Future of Society, and Regulation" (2018). On challenges in regulatory design, see "Regulatory Responses to Issues Raised by Libra" (2019).