© . FILE PHOTO: Hiromi Yamaoka, head of the Bank of Japan (BOJ) payment and settlement systems division, speaks during an interview with at his office in Tokyo, Japan, Oct. 4, 2016. REUTERS/Kim Kyung-Hoon By Leika Kihara and Takahiko Wada TOKYO () – Sanctions imposed on Russia could prompt more countries like China to look to central bank digital currencies (CBDC) as a means of countering the dollar’s dominance in the global financial system go, Hiromi Yamaoka, former director of the Bank of Japan, said Wednesday. † While sanctions using financial infrastructure are necessary in extreme cases, such as the crisis in Ukraine, they are “emergency tools” that should not be used too often, said Yamaoka, who is well-versed in CBDC and global resolution matters. US allies, including Japan, imposed a series of sanctions on Russia on Feb. 24 for invading Ukraine, including the freeze on the central bank’s foreign assets and the removal of many Russian banks from the global payment system SWIFT. “The most effective and powerful weapon has been the freeze on Russia’s foreign reserves,” said Yamaoka, the former head of the BOJ’s payment and settlement systems division. “It meant that US allies deliberately created a situation that puts Russia at risk,” he told . Yamaoka said crypto currencies were unlikely to serve as a useful sanctions loophole for Russia, as they are too risky as a means of transferring huge amounts of money. But Western sanctions against Russia underlined how politics and national security are increasingly affecting the financial world, including digital currencies, he said. China’s rapid progress in developing a digital yuan has alarmed some lawmakers in the advanced economies of the G7 as a potential threat to the US dollar’s global hegemony. US President Joe Biden signed an executive order last week requiring the government to assess the risks and benefits of creating a central bank digital dollar. “There is a chance that a country like China could promote the use of digital yuan for cross-border transactions and create a currency bloc” to counter dollar dominance, Yamaoka said. “Defense and national security are likely to become important topics when debating CBDC.” During his tenure at the BOJ, Yamaoka was directly responsible for the central bank’s research into digital currencies, including a joint experiment with the European Central Bank. He now chairs a group of banks and companies building a common settlement infrastructure for digital payments. Disclaimer: Fusion Media would like to remind you that the data on this website is not necessarily real-time or accurate. All CFDs (Stocks, Indices, Futures) and Forex prices are not provided by exchanges but rather by market makers, and therefore prices may not be accurate and may differ from the actual market price meaning prices are indicative and not suitable for trading purposes . Therefore, Fusion Media does not bear any responsibility for any trading losses that you may incur as a result of using this data. Fusion Media or anyone associated with Fusion Media assumes no liability for any loss or damage resulting from reliance on any information, including data, quotes, charts, and buy/sell signals on this website. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the riskiest forms of investment possible.
