The entity will test the issuance, distribution, and redemption of its digital currency. They will run phase-1 tests from now until March 2022.
Currently, the Bank of Japan (BoJ) seeks to move forward with the creation of its central bank digital currency (CBDC). For that reason, it has started to run a phase-1 proof of concept behind its digital yen.
The issuing entity of the Japanese currency will study the basic aspects and functionality of its CBDC. They recently made this report about that first phase through a statement.
Since January of 2021, the Bank of Japan has been preparing to start experiments with its CBDC. According to the statement, they will start the first phase of the tests given that the preparations are complete.
They will start running the testing phase, which will last for one year until March 2022. During that time, the Japanese financial authority will test “the technical feasibility of the basic functions and characteristics required for the CBDC.”
The Financial Authority Experiments with Fundamental Aspects of Its CBDC
The entity will develop a test environment that allows it to experiment with fundamental aspects of its future digital currency. These features include the issuance, distribution, and redemption of funds, according to the text.
The launch of a testing ecosystem for the digital yen shows a major advance in Japan’s explorations of digital currencies. Around a year ago, the Asian country studied the technical feasibility of a hypothetical digital yen, which is now taking shape.
The BoJ noted that it was seeking the possibility of a currency that would have the same functions as cash. To achieve this, they had to develop “a payment method that anyone can use safely and reliably anywhere, anytime.”
Central Banks Have Their CBDC on Their Agenda
Japan is advancing in the creation of its CBDC, but it remains behind China, the main power in Asia. The Chinese authorities have already progressed in various stages to test their digital yuan. People have already used it commercially in several controlled scenarios.
The Chinese authorities have distributed its digital currency among thousands of inhabitants to experiment with it in a real trading environment. For this reason, it already seems very close to its official launch, an issue that most of the world’s central banks have on their agenda.
Countries Outside of China Are Interested in Creating Their CBDCs
Other countries are currently developing their CBDCs or digital versions of their national fiat currencies. The most prominent include the United States, Canada, Brazil, and the Eastern Caribbean. The central bank of the latter distributed a CBDC among four countries in the area: Antigua and Barbuda, Nevis and Saint Lucia, Grenada, and Saint Christopher.
Apart from the Bank of Japan’s initiative, the private sector has also joined the wave of interest in digital currencies. For example, financial group Mitsubishi UFJ and staffing agency Recruit Group announced the creation of their digital currency in the middle of 2020.
By Alexander Salazar