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Japan launches digital yen pilot – Details

In this post:

  • The Bank of Japan (BOJ) has successfully completed the second phase of its central bank digital currency (CBDC) proof-of-concept (POC) experiment and has transitioned into the pilot phase in April as planned.
  • The second phase of the POC tested the implementation of upper limits on CBDC holdings and user convenience in initiating and scheduling payments.
  • A flexible-value token model and an orchestration system were trialed, aimed at handling multiple transactions from the same account quickly.

On the cutting edge of global digital transformation, Japan is progressing with its initiative to embrace digital currency. The Bank of Japan (BOJ) has completed the second phase of its central bank digital currency (CBDC) proof-of-concept (POC) experiment and transitioned into the pilot phase in April as planned.

The experimental process, spanning a year from April 2022 to March 2023, marked an exploration of functionalities complementing the fundamental ledger operations, a step up from its predecessor.

Evaluating the core functions of Japan’s digital yen

Throughout the second phase, the BOJ rigorously tested various technological applications for setting upper limits on CBDC holdings.

According to the BOJ’s report, these features were identified as “financial stability safeguards” to prevent drastic switches from bank accounts to CBDCs. Moreover, a focus was given to user experience, particularly in initiating and scheduling payments.

Considering scenarios where users hold multiple accounts with various intermediaries, these tests were crucial to ensure stability and convenience in the digital financial landscape.

The trial also included the testing of a flexible-value token model and an orchestration system designed to expedite multiple transactions from the same account.

Assuming 100,000 users with five intermediaries, the POC investigated load capacities of 500 and 3,000 transactions per second, sparking discussions on further scalability.

Amid the drive for increased accessibility, privacy was consistently at the forefront, with offline payments being evaluated for fraud prevention and privacy preservation.

The POC’s results were deemed successful, confirming the transition of the BOJ’s scheduled CBDC pilot project. This pilot aims to scrutinize the “end-to-end process flow” and enhance connections with external systems.

Engaging stakeholders in decision making

Japan’s stance on the issuance of a CBDC remains democratic, with the BOJ insisting that this decision should be a product of discussions among the Japanese public.

Aiming to solicit insights from private enterprises, a CBDC Forum will be established. The BOJ has committed to making its final decision on CBDC issuance by 2026.

The journey from concept to pilot is a testament to Japan’s dedication to digital innovation. This initiative continues to break new ground, exploring additional functionalities and evaluating the technical feasibility and processing performance of new technologies.

Japan’s pursuit of a digital yen signifies a pivotal step in the realm of digital currency, opening a new chapter in the financial history of the country.

With meticulous research and testing, Japan is paving the way for a future of digital transformation, positioning itself at the forefront of the next revolution in financial technology.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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