This brief posting at Ledger Insights simply announces that the Bank of Japan (BoJ) has completed some testing of a CBDC and will be moving into the next phase. Of course, we have been tracking progress across the globe with all sorts of alternative payment systems, including various methods of cryptocurrency. Since a predominance of central banks are piloting, testing, or studying the use of CBDCs, it becomes more easily expected that this landscape will be different in less than five years. The BoJ effort seems a similar path to the U.S. Fed, which recently released its phase I results of the Boston Fed and MIT collaboration on CBDCs, which is moving into phase II.
‘Today, the Bank of Japan (BoJ) announced that it has completed the first phase of its Central Bank Digital Currency (CBDC) Proof of Concept (PoC) on schedule and will begin its second phase in April…
The BoJ first published a paper on its approach to CBDC in October 2020, and it began the first phase of its PoC testing in April 2021. The initial stage targeted exploring the basic functions of a CBDC – namely, issuance, distribution and redemption.’
The article indicates that the BoJ is primarily testing consumer use cases, but also says that wholesale scenarios are being reviewed as well. This is similar in nature to other x-border experiments that we have been following recently, including the recent BIS release of their efforts with several central banks in this space. One interesting thing is that the article indicates that a commercialized version of the Japan CBDC is expected in 2023, so there is a timeline associated with the testing efforts reaching some conclusion.
‘While this PoC experiment focuses on a general purpose CBDC for consumer usage, the BoJ has also conducted experiments for a wholesale CBDC limited to financial institutions. For example, starting in 2016, a joint project with the European Central Bank explored distributed ledger technology (DLT), including for cross border payments…
Japan’s digital currency landscape has been abuzz in recent years, particularly thanks to the creation of a large private digital currency consortium in 2021, that involves some of Japan’s largest banks and industrial companies. The working name for the platform is the Digital Currency JPY (DCJPY), and it has plans to commercialize in 2023. In contrast, the BoJ has yet to announce if it will engage in a pilot program that will involve private payment service providers and users upon completion of the second phase of its CBDC trials.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group