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Home CRYPTO

Japan Is Set to Launch Digital Yen (CBDC) Pilot in April

BlockNews Team by BlockNews Team
February 20, 2023
in CRYPTO, MEDIA, POLITICS, SOCIAL
Reading Time: 3 mins read
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  • Bank of Japan plans to commence the pilot phase of its CBDC in April after completing the Proof-of-Concept test.
  • The pilot phase coincides with the change of power in the Bank of Japan from Haruhiko Kuroda to Kazuo Ueda.
  • The bank plans to involve the private sector through a CBDC Forum.

On Friday, the central bank of Japan announced that it would initiate the pilot phase of its central bank digital currency (CBDC) in April to test the use of the digital Yen. This comes after two years of tests and experiments, including the proof-of-concept test, which began in April 2021.

In the opening speech at a CBDC committee meeting, the executive director of the Bank of Japan, Shinichi Uchida, said,

 “The aim of the pilot program is twofold: first, to test the technical feasibility not fully covered by the PoCs (Proof of Concepts), and second, to utilize the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation.”

He also went on to clarify that no actual transactions between retailers and consumers will be held and that only simulated ones will be used for testing.

Japan will start a pilot program in April to test the use of a digital yen. https://t.co/UYec3GRTtT

— The Japan Times (@japantimes) February 17, 2023
Via @japantimes – Twitter

The pilot phase is intended to test end-to-end process flow while outlining the measures and potential challenges for connecting the experimental system with external ones. During this phase, the Bank of Japan also expects to improve the designs through discussions on various topics, including alternative data models and architectures for offline payments and the optimal design of the CBDC system in providing value-added services.

To this end, the bank will establish a CBDC Forum where private businesses will be invited and engaged in retail payments or related technologies to participate and offer insights.

This move has been made as the Bank of Japan prepares for a leadership change. Kazuo Ueda is anticipated to assume the top position from Haruhiko Kuroda as his second five-year term concludes in April.

Global CBDC Efforts

This pilot phase adds Japan to the list of countries trying to keep up with China, the leading government in introducing a CBDC. Central banks worldwide are intensifying their efforts to develop digital currencies. The actions are led by the goal of modernizing financial systems and expediting domestic and international payments.

The Federal Reserve of the United States is also considering the development of an entirely digital dollar, dubbed Fedcoin by some. However, Fed executives have indicated that launching such an asset would require the approval of elected officials.

In addition, the advanced economies of the Group of Seven (G7) are attempting to coordinate their efforts to issue central bank digital currencies. In 2021, the group concluded that any digital currency created by a central bank must maintain the bank’s ability to fulfill its monetary and financial stability mandate. Therefore, to support their endeavors, they have tried matching their policies with CBDCs to avoid unfavorable outcomes.

CBDCs have the potential to enhance payment efficiency, lower transaction costs, and boost financial inclusion. Nevertheless, some people are concerned about the influence on existing banking and financial institutions, privacy concerns, and potential security problems. As a result, central banks are treading carefully and taking a gradual approach to constructing CBDCs.

Disclaimer: BlockNews provides independent reporting on crypto, blockchain, and digital finance. All content is for informational purposes only and does not constitute financial advice. Readers should do their own research before making investment decisions. Some articles may use AI tools to assist in drafting, but every piece is reviewed and edited by our editorial team of experienced crypto writers and analysts before publication.
Tags: CBDCcryptoDigital CurrencyJapan
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