Japan’s Central Bank to Launch Its Digital Yen Pilot in 2021; China’s CBDC Accelerating Timeline
- Bank of Japan (BoJ) plans to launch pilot programs on the digital yen in April 2021.
- The central bank digital currency (CBDC) will not be distributed to the general population yet.
Japan is playing catch up to China’s CBDC plans, Kenji Okamura, vice-finance minister for international affairs, said in an online seminar on Friday, as Reuters reported. Speaking on the dangers of being left behind by the largest Asian economy in digital currencies, Okamura called for the country to move towards developing its own digital yen.
“The (digital) renminbi is moving at a relatively fast pace – presumably, they are aiming to take the first-mover advantage,” he said.
“First-mover advantage is something we should be afraid of.”
Less than 24 hours following the comments, the Bank of Japan (BoJ) announced its plans to officially draft a digital yen plan as early as the start of its next financial year – in April 2021. The report, titled, The Bank of Japan’s Approach to Central Bank Digital Currency, gave the central bank’s first full picture of what its CBDC will consist of.
As reported before, the digital yen will comprise of two main “digital coins” – wholesale CBDC and the general purpose CBDC. BoJ will begin a series of testing phases on the coins by developing a test environment for the CBDC and experiment with its core function as a payment instrument among the general public.
“The Bank will first test the technical feasibility of the core functions and features required for CBDC through a Proof of Concept (PoC)”.
The first proof of concept phase is expected to test basic functions needed in a central bank digital currency, including issuance, redemption, and distribution. The second PoC phase will experiment on additional features on a test environment, checking for a digital yen’s feasibility in the economy. BoJ will then launch a pilot program if the CBDC is successful.
The report further targets security, convenience, and resilience as the main pillars for a successful launch of the CBDC. The latter remains a key factor given the geographical nature of the islandic country.
“Offline use in times of system and network failures as well as electrical outages is also important for Japan, given the frequent occurrence of natural disasters.”
However, the BoJ stressed they still do not have any plans to launch the CBDC to the general public, stating,
“While the BOJ currently has no plan to issue CBDC…it’s important to prepare thoroughly to respond to changes in circumstances.”