The CBDC effort is ramping up across various countries, and the Bank of Japan has responded by launching a pilot program for its own CBDC. On February 17th, Uchida Shinichi, executive director of the central bank, shared (1) the latest development in the situation.
Before the CBDC committee meeting, he gave a speech discussing the various stages of the ongoing investigation into the matter. After the Proof of Concept (PoC) experiments are finished, Japan's "digital yen" pilot program will get underway.
Additionally, the financial institution started the proof-of-concept project to demonstrate the "technical viability of the essential tasks and features required for a CBDC." In April 2021, the project's first phase got underway, and during that time, the Bank of Japan conducted research on a CBDC ledger.
According to the evaluation results, CBDC basic transactions are capable of functioning in the process efficiency for numerous and low-value retail payments.
The bank continued its testing of the digital yen in April 2022, which marked the beginning of the second phase of the Proof of Concept. During this phase, more approaches were implemented than in the first phase. In a statement, the central bank said:
"Although it is planned that this stage will go through March of this year, we have already demonstrated that the processing rate of the CBDC network can be maintained even with more elements. Even though end users may have several accounts, one of these functions is to check and ensure that consumers' CBDC holdings and activities are within the upper limit set on each."
The Bank of Japan Will Be Starting a Pilot Program for CBDC
As a result of the test results obtained from the PoC testing, the Bank of Japan has decided to move through with the launch of the CBDC pilot scheme in April.
The course of action was developed primarily with two goals in mind. The objective is to validate the technological viability, which must be fully investigated during the first two rounds of the Proof of Concept.
The financial institution intends to "develop a system for experimentations, where a central system, middleman systems, and endpoint devices will be designed in an interconnected manner to prevent the central system from being the subject of PoCs as was done in the previous tests."
The bank will test the flow from beginning to end and be on the lookout for any potential problems that may arise while integrating with external systems.
Additionally, the Bank of Japan intends to involve private companies in the CBDC program. The bank intends to establish a CBDC Forum, and it intends to encourage private businesses to take part in the forum.
Shinichi concluded his remarks by stating that the central bank will continue its efforts to build a digital yen that will be agreeable to all the end users.