tl;dr
The Bank of Japan is exploring the creation of a digital yen central bank digital currency (CBDC). It is conducting a pilot project involving consultations with businesses and financial stakeholders to determine the form, functions, interoperability, and privacy/scalability of the digital currency. ...
Bank of Japan Explores Digital Yen
The Bank of Japan is exploring the potential functionalities and design considerations for a digital yen central bank digital currency (CBDC) through a pilot project involving stakeholders. This involves extensive research into various aspects of the potential digital yen, including privacy, security, and technological platforms.
Former Bank of Japan executive highlights the prolonged timeline for introducing a digital yen amidst global interest and China's limited-scope trials with the digital yuan.
Despite calls for swift introduction, the public's education and incentive to use a digital currency are vital considerations in Japan's context, given the country's cautious approach, technological preferences, and evolving consumer payment landscape.
Project Details
The project involves consultations with over 60 stakeholders from the business and financial worlds to determine the digital currency's form, functions, interoperability, and privacy/scalability. Five working groups are exploring various aspects of the CBDC, with preliminary findings suggesting the need for a central shared ledger and the capability to process hundreds of thousands of transactions per second.
Challenges and Considerations
Each additional functionality a CBDC can perform raises concerns over privacy and metadata sharing, requiring careful consideration. The Bank of Japan is interested in ways to keep additional data separate from transaction/payment data and ensure user privacy.
Global Context and Pressures
International pressure for central banks to go digital exists, with China already issuing a digital yuan. However, Japan's cautious approach and reliance on traditional payment methods add complexity to the potential adoption of a digital yen.
Japanese Perspective
Japan's cautious approach to adopting new technologies and its preference for physical cash pose challenges for the introduction of a digital yen. Educating the public and providing reasons for using a digital currency are crucial in this context.
Conclusion
Japan continues its exploration of a digital yen CBDC, emphasizing the need for extensive research and careful consideration of the country's unique technological and consumer landscape.
Sources: nChain’s CBDC playbook, CoinGeek’s Blockchain for Beginners section
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