BoJ Governor Warns of Risks Amid Asia’s Financial Digitalisation

Bank of Japan (BOJ) Governor Kazuo Ueda cautioned on Wednesday about the potential threats to financial stability arising from the rapid digitalisation of finance in Asia. Speaking at the Asia-Pacific high-level meeting on bank supervision, Ueda emphasised the importance of striking a balance between the advantages and drawbacks of financial innovation.

The proliferation of digital financial services across the Asia-Pacific region has been significant, particularly among populations in emerging nations who have embraced the convenience of smartphones for daily transactions due to limited access to traditional banking services. While this expansion promotes financial inclusion, Ueda highlighted the imperative for policymakers to address cybersecurity risks and bolster anti-money laundering regulations.

Ueda acknowledged the potential benefits of emerging technologies such as crypto assets, tokenisation, and artificial intelligence (AI) in the financial sector but also underscored the associated risks they bring. “A critical challenge for financial authorities lies in harnessing the advantages of the digitalisation of finance while effectively managing risks to ensure the stability of the financial system,” he stated during his keynote speech.

With financial services and providers diversifying rapidly, Ueda stressed the necessity of applying equal regulation to similar types of financial activities and risks. However, he acknowledged the difficulty in determining which activities and risks should be considered “the same” under this regulatory principle.

As Asia’s financial landscape continues to evolve with digital advancements, Ueda’s remarks serve as a timely reminder for stakeholders to remain vigilant against potential risks and to implement robust regulatory frameworks to safeguard the integrity of the financial system.