Japan’s central bank has launched the first phase of its proof-of-concept program for a CBDC and is expected to be completed by March 2022.
Following initial preparations to test the technical feasibility of core CBDC functions and features in early 2021, the Bank of Japan is beginning CBDC testing in its first phase today. At this stage, the bank will develop a test environment for CBDC and conduct experiments on basic functions related to payment, issuance, distribution, and redemption of a CBDC.
As per the announcement, the first phase will be completed by March 2022.
According to the roadmap, the Central Bank will then offer the digital yen to private businesses and end-users.
CBDC will complement cash economy
Recall that the BOJ earlier said that it would be desirable for the CBDC to be used for cross-border payments and not only for domestic payments. Such CBDCs will complement, not replace, cash, and focus on making payment and settlement systems more convenient, BoJ said.
Japan has been cautious about being hasty on digital currencies due to the social disruptions it could cause in a country that has the world’s most cash-loving population.
However, China’s steady progress toward issuing digital currency has prompted the government to reconsider, and pledge in this year’s policy platform to look more closely at the idea.
The BOJ’s recent efforts to catch up include creating a new team focusing on issuing digital currency and conducting joint research with other central banks.
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