Key Takeaways:
- The Bank of Japan intends to launch a digital yen CBDC pilot in early 2023, according to one of the most recent reports by Nikkei.
- The decision to lawfully embrace a digital yen will be made in 2026.
According to the regional news outlet Nikkei, the Bank of Japan (BoJ) has declared its determination to continue looking into the possibility of developing a central bank digital currency (CBDC) for the island nation.
A central bank digital currency will be put through a stress test by the Bank of Japan and a number of undisclosed financial institutions. The functionality of deposits and withdrawals as well as what transpires without internet access, will be tested.
Earlier in June, a bill designating stablecoins as a type of digital currency was approved by the Japanese parliament. The fact that Japan was one of the first developed nations to adopt a stablecoin legal framework received the interest and attention of the community.
The central bank intends to test the digital pilot for a period of two years before debating and deciding whether to proceed with the issuance in 2026. The experiment’s participating banks have not yet been identified, though.
Even though the Nikkei article didn’t mention the banks that will participate in this project, the “three megabanks” most probably suggest to the financial groups Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho.
To diagnose and address any issues pertaining to customer deposits and withdrawals, the central bank of Japan will work with a number of significant private sector banks and organisations. The CBDC’s offline capabilities, which enable it to work properly during natural disasters, are among the BoJ’s priority areas.
The BoJ is the most recent in a line of central banks to start CBDC research and development projects. However, China is currently at the forefront in the race for a digital currency.
In order to test the fundamental operations required for a digital currency, such as issuance and circulation, the Japanese central bank carried out an internal trial last year. The upcoming programme is a final trial with an emphasis on application.
The BOJ claims that banks have been keen to take part. Additionally, the central bank is hiring fintech firms and IT suppliers to create security tools like identity verification.
