A new piece of information released this morning shows that Japan’s central bank digital currency (CBDC) now has its proof of concept. After completing the tests of the main features to confirm their viability for a release before mid-year, Japan’s apex bank now plans to roll out the first stage today.
What Would Be Tested During This First Stage?
The top three focus of this first stage would be creating a test environment for the digital bank’s system, testing out payment-related functions in their basic terms, as well as issuing, distributing, and redeeming a CBDC. Part of the press release states that the first quarter of next year is the target to complete this stage.
Originally, the bank of Japan’s plan was to launch this test in the first month of this year’s last quarter, but the bank decided to hasten up so that it can be adequately prepared for any changes. However, the bank’s release read in part that “it isn’t yet planning to issue the digital currency based on the perception of being a stable and efficient system for payments, settlements or both.”
However, based on a press conference last month by Shinichi Uchida, no one should expect a CBDC roll out for everyone’s use soonest.
Shinichi was quoted in the press conference saying, “we are convinced that the first and necessary step is to perform experiments. Hence, we are maintaining our stance of not issuing a CBDC at this time.”
Would There a Stage 2?
The earliest plan of the CBDC was to complete the second stage of testing before starting the test system that will involve end-users and payment service providers. However, no plan has been released for the completion of the second stage of testing. During each of the test stages, more CBDC features will be implemented to confirm their viability.
In a recent announcement, the bank of Japan (BOJ) revealed that it has created a liaison and coordination committee to properly integrate the private sector in all the soon-to-be-released test programs. It would be recalled that the Bank of Japan first showed interest in CBDC in the middle middle of last year. At that time, the bank’s announcement was “considering the introduction of a CBDC but all the technical aspects, collaboration with other central banks and appropriate finance firms are still being fine-tuned.”
The bank went further to state that universal access and resilience are their main obstacles to adopting CBDC during that period.
For comparison’s sake, China has already completed the test stages and started the pilot program for the digital version of the yuan.
However, one edge the digital Japanese yen might have over the digital yuan is that the BOJ plans to ensure that its digital currency can work offline.
In another development, Haruhiko Kuroda (principal head of the BOJ) revealed that the apex discovered that “over 59% of banks were already performing various proofs of concept. He also said the BOJ is yet to reach a concrete agreement on the right approach in providing central bank money.”