According to an official announcement on Monday, the Bank of Japan (BoJ) has finally launched a proof of concept for CBDC or central bank digital currency.
Bank of Japan experiments CBDC
Bank of Japan initially announced its plans of launching the CBDC testing in October 2020. They made emphasis that studying and preparing for a potential digital currency in the right way is crucial even though they don’t see any strong case for issuing a CBDC anytime soon.
Phase 1 of the CBDC experiment began today, in accordance with initial plans made to get the core CBDC functions and technical feasibility tested out earlier in 2021. In this phase, the bank will focus on testing the basic functions of a CBDC as a payment instrument. These include the issuance, distribution, and redemption of the digital currency.
The first phase is expected to be completed by March 2022 to start the second phase. In the second phase, the central bank will further stress-test other detailed functions of a CBDC, per the document.
Japan will launch a pilot program for CBDC
According to the original roadmap for the CBDC, the BoJ will launch a pilot program for the central bank digital currency in the third phase of the PoC. During the pilot program, some payment service providers and end-users in Japan will be able to test the digital currency.
Recently, the BoJ established a committee to collaborate with both the private and public sectors on the upcoming CBDC pilot, which will begin after the second phase is completed.
The central bank of Japan is trying to follow in the doorstep of other central banks worldwide. The Bank of China (PBOC) holds the mantle as the leader of these activities as its plans for creating the digital yuan started in 2015. Plus, they have been running trials widely in China for the CBDC since last year.
Currently, the Federal Reserve, ECB, and central banks of other countries are also considering moving towards this direction.