The central Bank of Japan (BoJ) has come good on its promises to begin testing a prototype for a digital yen before the end of Spring.
Per Reuters, the BoJ has begun a series of tests that will run until March 2022, and will test the “technical feasibility of issuing, distributing and redeeming” its central bank digital currency (CBDC) – although unlike its East Asian economic rival China, it is still yet to commit to issuance.
The media outlet quoted the bank’s Executive Director Shinichi Uchida as repeating the claim that no firm commitment would be forthcoming on issuance. Uchida told politicians and banks,
“While there is no change in the BoJ’s stance it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step.”
A second phase of tests, to follow, will see the BoJ look at matters including the question of whether it wants to limits the amount of CBDC commercial banking partners can hold.
The BoJ is also looking into the possibility of creating a pilot with payment providers and a limited number of end-users, Uchida added.
Reports from both Japan and South Korea have indicated that Tokyo and Seoul are playing a frantic game of catch-up with Beijing and its forthcoming digital yuan – and are unwilling to allow China to pull too far ahead in the CBDCs race.
Both Beijing and Moscow have identified CBDC issuance as part of a greater strategy to help them purge the USD from their trading ecosystems. Also, central banks have stepped up their CBDC efforts at least in part to ward off the threat from cryptocurrencies.
CBDC projects are also underway in the European Union and elsewhere in the world.
A Japanese company has already helped Cambodia release its own CBDC and says it is working with “other countries” on possible CBDC-related projects.
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