Japan is launching a pilot program to run extra tests on its central bank digital currency (CBDC), the Digital Yen. This anticipated move came after two years of testing for proof of concept to decide whether to issue a CBDC.
Bank of Japan’s executive director Shinichi Uchida gave an opening speech at the central bank’s meeting with private-sector executives on the 17th of February. The speech revolved around how launching the pilot program will continue the work on the technical feasibility of the digital yen in April.
According to Uchida’s speech, Bank of Japan (BOJ) will not be conducting any actual retail or consumer transactions. Instead, they will be simulated under testing conditions. This decision might be partially influenced by the transition of BOJ’s leadership from Haruhiko Kuroda, whose second five-year term ends in April, to Kazuo Ueda.
Uchida proceeded to emphasize the need to consult with the private sector on alternative data models, designs for offline payments, and other critical system components. Hence, the bank will create a CBDC forum that will hold ideas and thoughts on this subject.
Shinichi Uchida stated about the subject:
“If a CBDC were to be issued in the future, exploring its framework in such a phased manner and engaging in highly transparent communication with the private sector are necessary steps to take for adoption in society.’’
The Financial Services Agency of Japan also released that the ban on external stablecoins might be lifted in the amendments to be passed by June 2023. This does not mean that all CBDCs will be allowed into the market, but rather that certain coins that successfully pass regulations can be traded within the Japanese markets.
Japan and other countries are working to catch up with China which is leading the global race to develop CBDCs and has stepped up pilot programs for retail payments.