Japan is all set to catch up with nations like India, China, and Russia in expediating the development and trials of its central bank digital currency (CBDC). The Asian nation is set to launch its digital currency in its pilot phase starting April. The development was announced on Friday, February 17, by Shinichi Uchida, the Executive Director of the Bank of Japan (BoJ). In its polit phase, the digital yen will be tested for how technically feasible it is for commercial uses.
Private companies will be onboarded by the BoJ to be participants in the testing of the digital JPY. The focus is to analyse and justify the fundamentals of the proof-of-concept (PoC) for this CBDC, which has been under testing in Japan since April 2021.
“The aim of the pilot program is twofold: first, to test the technical feasibility not fully covered by the PoCs, and second, to utilise the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation,” Uchida wrote in a blog post.
Japan will be developing a working financial network comprised of a central system, intermediary network systems, and endpoint devices — all configured in an integrated manner to test the end-to-end speed and efficiency of the digital currency.
The BoJ is exploring to identify touch points in its CBDC that could be improved.
“Topics on the agenda currently include measures and potential challenges for connecting the experimental system with external ones, alternative data models and architectures for offline payments, the optimal design of the CBDC system in providing value-added services, and challenges and technologies or functions that could become necessary where a touchpoint with users arises,” Uchida noted.
The BoJ will be creating a CBDC Forum that will serve as a platform for industry insiders to submit their observations and suggestions.
Japan could see a wider roll out of its digital JPY by 2026. Before that, the BoJ aims to check if the CBDC works efficiently under disaster-lie situation or no Internet connectivity.
A CBDC or a central bank digital currency is built on blockchain, works like cryptocurrencies, but are issued and regulated by the central bank.
CBDCs are being designed by several nations around the world with the aim of complementing, rather than replacing, current forms of money and provide an additional payment avenue to users.
