Bank of Japan: Pursuing Safety and Efficiency of the Payment and Settlement System as a Whole

Posted on Apr 19, 2022 by Masaki Bessho, Head of FinTech Center, Payment and Settlement Systems Department, Bank of Japan

The Bank’s Roles in Payment and Settlement Systems

Article 1 of the Bank of Japan Act states “ensuring smooth settlement of funds among banks and other financial institutions” as one of its goals. Pursuing this mandate, the Bank plays a role as an operator of financial market infrastructures (e.g., “BOJ-NET Funds Transfer System” for central bank money settlements, “BOJ-NET JGB Services” for government bond settlements) and oversees private financial market infrastructures.

In addition, recent developments have raised expectations for a central bank to play a more active role as a “catalyst” in fostering innovation in payment and settlement systems. Developments of novel technologies give opportunities for further improvement of their safety and efficiency. FinTech, “new combinations” of “finance” and “technology,” has the potential to create new businesses, which could contribute to economic growth and improved social welfare.

FinTech Center: Its Focuses

In 2016, the Bank launched the FinTech Center in the Payment and Settlement Systems Department. Since its inception, the Center has engaged in efforts to encourage novel technologies that would contribute to the further convenience and efficiency of financial services, while ensuring financial stability and confidence.

The Center focuses on three kinds of activities.

First, we are actively engaging with diverse forums domestically and internationally. Contacts with a range of players are the basis for playing the catalyst role. The Bank has hosted a series of “FinTech Forums” and “Future of Payments Forums” to broaden and deepen our interactions with business leaders and experts. We have also been enhancing our communication, leveraging events hosted by other public and private parties. For example, in March this year, the Japan FSA and NIKKEI co-hosted “FIN/SUM 2022,” where our Governor delivered a speech to communicate the Bank’s approach to the audience. During the event, we also organized a session presenting our recent research outputs and hosted a panel on wholesale central bank digital currencies (CBDCs) with colleagues from other central banks.

While the Covid-19 pandemic has made it difficult to communicate face-to-face across borders, the adoption of web meeting platforms has made it easier to join meetings across the globe, giving us new opportunities for wider outreach.

Second, as an operator of core infrastructures supporting the economy and society, the Bank should make continuous efforts to catch up with new technologies that have the potential to be applied to our system infrastructures. For example, we have been exploring the potential of ...

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Fintech, DLT, CBDC, Cross-Border Payments, DeFi