• CBDC trial has commenced by the Bank of Japan
• The trial includes three stages, among which two phases are for Proof-of-Concept
• The bank revealed that the first phase will last for a year until March 2022

CBDC or central bank digital currency has become something that almost every central bank is looking into. People’s Bank of China (PBoC) is leading with such an approach. Recently, the Japanese central bank also confirmed that it has begun trials for digital yen in the region. Notably, the Bank of Japan (BoJ) aims to explore the technical feasibility of the national digital currency in its first phase Proof-of-Concept (PoC). Moreover, the bank also revealed that the first phase of the trial will last for a year till March 2022. However, the central bank is yet to decide whether it will proceed with a CBDC.

Japan explores CBDC functionalities

According to a short statement published by the Bank of Japan, it would trial basic functionalities of CBDC. such functionalities include issuance, distribution, and redemption. Notably, six months ago BoJ had released a CBDC document. The filing underscored the three stages of trial. Indeed, the stages include two of the phases for Proof-of-Concept followed by a pilot program.

Japan’s objectives are quite different

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According to Haruhiko Kuroda, the governor of BoJ, Japan has entirely different objectives with CBDC. Kuroda explained that heavy use of cash in retail payments and the earthquake and tsunami of 2011 has caused widespread disruption in the country. Indeed, there is a greater emphasis on the ability to execute payments offline. 

It is worthy to note that although the cash usage is high, BoJ is eager to bring change. Moreover, the bank is willing to support a digital society. BoJ is keen to improve payment and settlement efficiency. And BoJ also noted that most of the transactions occurred during banking hours that are required to be addressed. Indeed, addressing such limitations is the main motive behind the various private sector initiatives like SBI’s Money Tap.

Other central bank digital currencies are forging ahead

China has already issued its digital yuan in some of its provinces. It is worth noting that the digital yuan trial has progressed to a second wave of pilots. On the other hand, the Bahamas, the island, issued its own Sand Dollar last year. Eastern Caribbean has begun a blockchain-based pilot. Jamaica has also announced plans of CBDC that don’t include blockchain technology. Simultaneously, other nations globally are also researching CBDCs .