The Bank of Japan (BoJ) revealed on Monday (April 5, 2021) that it has officially started Phase 1 of its central bank digital currency (CBDC) pilots and related experiments.
The initial phase of testing will mainly focus on assessing the basic functions of CBDCs as an effective payment instrument, including the testing of the issuance process, distribution, and redemption. The first phase of these experiments should be completed by March of next year.
The BoJ said that it will then transition to Phase 2 in order to test out more advanced functions of CBDCs, as the institution had confirmed in October 2020. If required, the reserve bank will proceed to Phase 3, during which private firms and other consumers will take part in a pilot program.
The BoJ clarified that it doesn’t yet have concrete plans to offer a CBDC. However, it intends to be fully prepared if there’s ever a need to issue its own digital currency. This, according to the BoJ’s Executive Director Shinichi Uchida.
Uchida noted that the bank thinks that performing experiments at this stage is “a necessary step.” Uchida has also mentioned that given the factors at play, including tech developments in Japan and abroad, there’s a possibility for CBDCs to offer a means of makng payments and settlements and for these platforms and systems to eventually become an international standard.
Reserve banks across the globe have been considering or even launching their own virtual currencies. China has taken a decisive lead when it comes to developing, testing, and issuing a CBDC with major cities such as Shanghai and Shenzhen already allowing people to test out these new payment methods.
As covered last month, the BoJ had confirmed that it is getting ready to work on a national virtual currency. Haruhiko Kuroda, governor of the 138-year-old institution, stated that the BoJ, the nation’s reserve bank, would begin “preparing thoroughly” for a future that may include a State-backed digital currency.
Kuroda, whose comments came during a recent seminar, said that the BoJ would perform various experiments related to the development of a digital asset later in 2021.
As reported recently, the Bank of International Settlements explained how interoperability and common interfaces are needed for CBDCs.
As covered in March, the US Fed’s digital dollar initiative might affect revenue of Wall Street giants, but digital currency may take several years to launch. Also in March, Chinese officials addressed concerns regarding user privacy and the digital yuan.
