WHAT’S BEING CLAIMED:
- The Japanese central bank, ‘The Bank of Japan’ (BoJ), has formally launched a feasibility study to assess the potential of central bank digital currency (CBDC).
- During the initial phase, the bank would test its digital yen as a payment option.
- The BoJ would proceed with the next phase if the current phase would yield promising results.
In a bid to assess the feasibility of a central bank digital currency (CBDC), the Japanese’s central bank ‘The Bank of Japan’ (BoJ) officially unveiled its first phase of the study.
Dubbed as the “Proof of Concept (PoC) phase, the BoJ will test its digital currency “as a payment instrument such as issuance, distribution, and redemption.”
Being managed by the Japanese government, the CBDC would become the digital version of the Japanese currency yen. With a projected one-to-one ratio alongside specific fiat currency, this would be the same with stablecoins. The central bank, though, remains in control of the ledgers and they would not be managed by a blockchain.
The first phase, which would be the basis of the stakeholders’ assessment, would run for a year.
In a statement last month, the bank’s executive director Shinichi Uchida said that some individuals asked if they could use cash or bank accounts. People have also thought about whether the CBDC “could be addressed by alternative solutions that did not require such extensive and large-scale efforts.”
“While there is no change in the Bank’s stance that it ‘currently has no plan to issue CBDC,’ we believe that initiating experiments at this stage is a necessary step,” Uchida noted, citing the PoC phase that had just kick-started.
Should the bank conclude that the PoC phase was rewarding, they would proceed with the next stage that is a pilot program.
Uchida also said that “while it is not that we need to come up with solutions […] immediately, we need to remain aware that we might need to use CBDC as a part of our solutions at some time in the future.”
Same with other central banks, Japan’s approach is a careful but thorough style. The Bank of England announced last month that a CBDC would require a “very careful” design because they could post “significant challenges.” The Federal government has been “evaluating” the CBDC’s workability. The European Central Bank is also “exploring” the possibility of building a CBDC.
Meanwhile, another Asian powerhouse, China, has also made a pilot run of its digital yuan called Digital currency, electronic payment (DCEP).