By Leika Kihara and Takahiko Wada

TOKYO, Reuters – G7 policymakers need to speed up the creation of a common framework for regulating digital currencies. The Ukraine war has increased the importance of preventing them from being misused as a loophole to sanctions. A senior Bank of Japan official stated that.

Stablecoins and cryptoassets are under regulatory scrutiny because of concerns that they might be used to bypass financial sanctions placed on Russia after its invasion in Ukraine.

These digital currencies may disrupt the global settlement system because they allow for easier payment methods than traditional ones using U.S. dollars, euros, and yen. Kazushige Kamiyama is the chief of the BOJ’s Payment and Settlement Systems department.

Kamiyama said in an interview that it was easy to establish a global settlement system by using stablecoins.

He stated that the Group of Seven’s advanced economies should quickly reach a common agreement on how to improve current rules. These outdated rules do not adequately reflect the increasing presence of digital currency.

Kamiyama said that the G7 countries are working together to address this issue, and they also share information about current developments. Kamiyama is part of G7 talks on digital currencies.

Japan and other U.S. allies imposed sanctions on Russia, including those against Russia that were triggered by the invasion of Ukraine.

Regulating cryptoassets or stablecoins can be difficult because holders have the ability to transfer money across countries much more quickly than with legal tender.

Kamiyama said that the debate about the design of the digital yen will be influenced by privacy concerns and money laundering concerns. Kamiyama’s department oversees the BOJ’s experimentation with issuing a central bank digital currency.

According to him, the BOJ will start the second phase of its experiments in April. This will be about one year long and will test features such as the ability to limit the amount each entity can keep.

BOJ Governor Haruhiko Kuroda stated that a decision about whether or not to issue CBDC could be made by 2026. Kamiyama however said that the timing of this decision will partly depend on how fast other central banks make their moves.

He said that “given the speed at which so many central banks of advanced nations are moving together, dramatically, and simultaneously on CBDC it could cause major changes in the settlement systems in the future.” Japan must ensure it is not forgotten.”