With the new pilot, the Japanese central bank is set to explore CBDC’s design and technical feasibility.
The Bank of Japan, also known as the central bank of Japan, has announced its plans to launch a central bank digital currency (CBDC) pilot in April 2023.
The news was revealed by the Bank of Japan executive director Shinichi Uchida at “the Fifth Meeting of the Liaison and Coordination Committee on Central Bank Digital Currency.”
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In the speech, Shinichi Uchida stated that the CBDC pilot will be dedicated to testing two aspects of the digital yen. The first aspect aims to test “the technical feasibility not fully covered by the” Proof of Concepts. On top of that, with the pilot, the Bank of Japan aims to “utilize the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem.”
The Bank of Japan has been actively working on CBDC since 2020. In October 2020, the bank started its first experiments with CBDC. At that time, the central bank aimed to test its Proof of Concept or the technical feasibility of the core functions and features required for a CBDC.
In April 2021, the bank created an experimental environment “centered around a CBDC ledger.” After a year, the central bank implemented more complex functions of CBDC and tested their “technical feasibility and processing performance.”
The Bank of Japan executive director stated that, at this point, the CBDC pilot will not include transactions made among actual retailers and customers. Instead, it will experiment with only simulated transactions.
In the speech, the Bank of Japan executive director Shinichi Uchida noted:
If a CBDC were to be issued in the future, exploring its framework in a such phased manner and engaging in highly transparent communication with the private sector are necessary steps to take for adoption in society. It is therefore essential to develop institutional arrangements that would satisfy all parties involved, and proceed in line with this.
It is worth noting that Japan is one of the countries in the world where foreign stablecoins like Tether (USDT) are prohibited. However, it is believed that The Financial Service Agency (FSA) of Japan is looking to lift the ban. Based on FSA, the institution plans to allow the Japanese to use and trade foreign stablecoins from June 2023.