Victor Ugochukwu · Dec 14, 2020 . 5min read
Bank of Japan contemplates on trialling CBDC in early 2021
The Bank of Japan to start trialling Digital Yen by 2021. However, the monetary regulator has no plans to roll out the CBDC publicly as of now .
By Komal Joshi · Oct 10, 2020 . 6min read
The Bank of Japan (BoJ), is the newest monetary regulator to officially draft a plan for a central bank digital currency (CBDC). It will start trialling at the beginning of FY 2021, which begins in April. The report, named “The Bank of Japan’s Approach to Central Bank Digital Currency,” was issued on Friday, providing a complete picture of the Central Bank’s stand on launching a digital yen. However, the Bank of Japan says that it has no plans to issue a central bank digital currency, or CBDC, though it reflects it necessary.
Bank of Japan outlines the motives to adopt CBDC.
The Bank of Japan highlights three potential motives for a CBDC. According to the report, cash dominates retail payments in Japan. However, if the scenario were to change, the Bank might require to offer a CBDC as an option. An added reason would be the need to enhance payment and settlement systems’ stability and productivity.
According to the present situation, there are various private Japanese initiatives, especially from banks looking to give digital yen. However, the third reason to drive CBDC is the possible digital yen requirement to support a digital society. Presently, there’s quite a push by Japanese institutions to utilize blockchain, and a wholesale CBDC that would be beneficial for on-chain settlement.
Potential characteristics excepted from CBDC.
The digital yen report also emphasizes the vital characteristics that would be anticipated from a CBDC. The first is unlimited access, so not just through mobile phones but also by accepting cards. The second is security to deter counterfeits and flexibility in terms of 24/7 availability and the capability to utilize it offline in disasters. A digital yen would require to provide instant payments and interoperability with other payment and settlement systems.
According to the report, the BoJ outlines three tests, including two proofs of concept (POC). If the BoJ aspires to take things further, there will be a third pilot phase. The PoC phase 1 will start before March. The report follows a working group on CBDC set up by the bank three months ago. Like many other central banks, the BoJ wants to ensure international cooperation. The BoJ earlier conducted various trials as part of Project Stella with the European Central Bank (ECB).
Earlier, Japan’s leading blockchain association, Japan Cryptocurrency Business Association (JCBA) and Japan Blockchain Association (JBA) have collaborated to boost crypto assets. They have joined hands to develop crypto-assets (virtual currency) and blockchain technology.
Follow Cryptodose for more updates.