Japan’s central bank commences Proof-of-Concept for CBDC

TL;DR Breakdown

• The central bank of Japan has started Phase 1 of its CBDC experiment.
• It’s expected to last until March 2022, and we enable the bank to experiment with the core functions of a CBDC.

The central bank of Japan announced Monday it has commenced a Proof-of-Concept (PoC) for a digital currency. This will enable the Bank of Japan (BoJ) to experiment with the essential functions of CBDC or central bank digital currency. Notably, the bank has been researching CBDCs since the past year, although it doesn’t see any strong case for issuing a digital currency at the moment.

Japan begins experiment for CBDC

Phase 1 of the experiment, which began today, is expected to last for about a year (March 2022). At this stage, the bank will focus on experimenting with the basic functions that are essential for a CBDC as a payment instrument. Precious, this covers the issuance, distribution, and redemption, according to the document. The bank intends to further test other detailed functions of a CBDC in the second phase.

In the third phase, it will debut a pilot program for digital currency that will include the end-users and private businesses.

BoJ isn’t ready to issue a CBDC soon

BoJ reiterated that it currently doesn’t plan to issue a central bank digital currency soon. The development today is aimed at keeping them preparing in case the need arises. While speaking on CBDCs last month, the central bank’s executive director, Shinichi Uchida, said:

“We believe that initiating experiments at this stage is a necessary step. […] Given the current factors at play, including technological developments at home and abroad, there is a reasonable possibility for CBDC to provide a means of payments and settlements and for such systems to become global standards.”

Cryptopolitan recently reported that the central bank intends to develop a multi-purpose CBDC. However, the digital currency will have to complement the fiat currency and not replace it outrightly.