Last October the Bank of Japan published a CBDC paper that outlined its plans to prepare for a CBDC trial, and earlier last month the Governor of BoJ Haruhiko Kuroda stated that they had plans to begin trials this spring. Today the Bank of Japan has confirmed that it has started the first phase of central bank digital currency trials, which will extend to March 2022.
While this announcement confirms the digital Yen trials, the bank is very clear that this is not confirmation that they are going to go ahead with a CBDC in the future. The trials main functions are to “test the technical feasibility of the core functions and features required for CBDC” such as issuance, distribution and redemption.
In a statement this March the Governor of Boj commented on the necessity of preparing for a time when CBDCs could be necessary.
“From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, we consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner. Amid significant changes that are occurring with the advent of the digital society, we will take this opportunity to carefully consider the way in which we should provide central bank money.”
The recent statement from the bank confirms the CBDC trials have commenced, and also outlines the duration of the trial as part of its Proof of Concept Phase 1.
Neighbouring China has already commenced their digital Yuan trials, with plans to issue the currency by the 2022 Bejin winter olympics. This places pressure on countries such as China and the US, who have both outlined CBDC trials, and may lose influence if a competing digital currency hits the market first.
A recent CBDC survey by the Bank for International Settlements (BIS) found that 60% of Banks surveyed were conducting Proofs of Concept out of a total of 65 central banks surveyed, signalling a significant interest for digital currency. Over the last four years the interest in CBDCs has increased significantly, and central banks engaging in some form of CBDC work currently stands at 86%.
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