- The report talks about the future possibility of a surge in the public demand for the Central Bank Digital Currency (CBDC)
- BoJ announced they would release CBDC for ‘general purpose’ and ‘wholesale.’
- Report mentioned that the bank would approach a rather concrete and practical road for the experimental development of CBDC
Bank of Japan (BoJ), on October 9, released a report called ‘The Bank of Japan’s Approach to Central Bank Digital Currency”. The report talks about the future possibility of a surge in the public demand for the Central Bank Digital Currency (CBDC). However, BoJ, for now, has no plan for the issuance of the CBDC in a hurry but they feel that development of the same is crucial. Stating reasons for stability and efficiency of the payment & settlement system, BoJ said they would continue to develop the technology. Bank plans to start the testing phase by the fiscal year 2021
BoJ announced they would release CBDC for ‘general purpose’ and ‘wholesale.’ While the general-purpose includes the intended users for the digital currency such as end-users for payments along with the cash, individuals to support the private payment systems of the country, and firm to digital society of the future could be availed with the suitable payment and settlement system.
Barriers Needed to Overcome by BoJ
As per the report, if the country’s banks have to issue CBDC to the general usage, various barriers are needed to be eliminated. The bank needs to ensure that CBDC has universal access, safety against the counterfeiting, and protocols to avoid illicit activities. The main purpose of the digital currency is to have access anytime. Therefore banks need to be resilient and offline support for times when the network fails shall be considered.
This week, Japan has become the second country to comment that it is simply developing the CBDC for testing and preparatory purposes and holds no plan to launch the one. Just days back, South Korea released a similar notice talking about a detailed plan for the development of the CBDC but commented the country holds no plan to launch its digital currency. It seems China is the only country vocal about its plans for the CBDC launch.
Technical and Practical Approach by BoJ
BoJ’s report mentioned that the bank would approach a rather concrete and practical road for the experimental development of CBDC rather than the previous conceptual research approach. The first step in this direction will be to develop strong technical feasibility through Proof of Concept (POC). Three months back, on July 20, the Bank of Japan set up a digital currency team of about ten people in the settlement agency bureau. The Bank of Japan was preparing to officially start an empirical test on Digital Currency (CBDC) issued by the Central Bank.
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