Japan is just one of the last countries in the world to make the necessary efforts to issue its own digital currency (CBDC). The country, however, is taking a measured approach to the virtual currency project.
The Bank of Japan - the nation's central bank - announced on Monday that it is beginning the first phase of testing for its digital currency. This phase, which the BoJ describes as the proof-of-concept (PoC), is expected to last until March next year and will involve testing the basic functions and characteristics of a central bank-issued digital currency.
The BoJ unveils the Proof-Of-Concept for its CBDC
Interest in CBDCs has increased significantly since the start of the pandemic due to the COVID-19 virus. For the uninitiated, CBDCs are state-issued digital currencies, that is, they are basically digital versions of a country's national currency. They have some similarities to stablecoins, but are mostly made on non-blockchain networks. Japan has apparently begun a slow march towards building its own CBDC.
According to an official announcement released on March 5, Japan's central bank has made the necessary preparations to launch digital yen experiments in the first quarter of this year. As a result, the bank is now ready to begin CBDC experiments in its first phase.
“In phase 1 of the PoC (Proof-Of-Concept), the bank plans to develop a test environment for the CBDC system. In addition, it will conduct experiments on the basic functions that are fundamental for CBDCs as a payment instrument, ie issuance, distribution and redemption ”.
Phase two of the experiment will follow
As part of the announcement, the BoJ revealed that it intends to run the PoC phase for a year, and then follow up with phase two of the experiments where it will evaluate multiple functions of the digital yen as the maximum amount of digital currency that a single entity. can hold.
The BoJ announced its intention to begin CBDC experiments as early as last October. At the time, the bank indicated that although it had no plans to launch a digital currency in the near future, as it was concerned about maintaining the stability of the country's payment system, it also said it was vital to prepare "fully to respond to changes. in the circumstances in an appropriate way ".
The bottom line is that Japan is planning to conduct several experiments of its CBDC, before deciding to experiment with a real one.
This year we will see several central banks launching their pilot programs for CBDCs. As for the countries that will take the lead, the China appears to be the leader more obvious, as he tries to take advantage of the first mover.
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