Japan backs off and relaunches its CBDC project

While states are increasingly taking initiatives to issue their central bank digital currency (CBDC), for Japan, the Digital Yen has never been a priority. The last I heard, the Central Bank of Japan (BOJ) plans to start working on its CBDC project as early as spring 2023 in collaboration with three megabanks.

BOJ partners with three local banks to issue CBDC

According to a report in the local Nikkei press, the Central Bank of Japan (BoJ) is close to completing testing of the core functionality of its central bank digital currency (CBDC).

Should this stage be successfully completed, the BoJ would then move on to the second phase, which could begin in spring 2023.

Recall that the first trials had started in April 2021 and ended in March 2022. At the time, the Central Bank of Japan was not hot on the issue of issuing the digital Yen.

The stage of this experimentation focused on testing the basic functions of the digital yen, such as issuance, deposits and withdrawals.

In addition, the Central Bank of Japan had previously stated that it intended to involve private companies and consumers in the pilot tests of the second phase. At the same time, it has collaborated with three mega-banks whose names are not yet disclosed.

Several countries are rushing to adopt CBDCs

Since the success of Bitcoin, countries’ interest in digital central bank currencies has continued to grow. Research by BanklessTimes has shown that the number of countries adopting CBDCs has increased by 160% between 2019 and 2022.

Countries like China are ahead of the curve in developing it (the Yuan in the Chinese case). In fact, China started its experiments in 2014. At the end of 2019, it began the first tests.

In October 2022, the Chinese Central Bank announced that more than 261 million individuals have accounts in digital yuan. It also reported that 100 billions of yuan ($14 billions) have been exchanged.

The Bank of India is also preparing to launch its digital rupee. Currently, several other countries are in the testing phase.

Unlike most central bank digital currencies that do not directly use blockchain, the Japanese Digital Yen will use the more advanced technologies often used in cryptocurrencies.

Lately, the Japanese central bank seems to be accelerating its Digital Yen project, yet just a few months prior, launching a CBDC was not a priority. In July, the BOJ announced that the project had been abandoned. Did the FTX case influence the Japanese authorities? Most probably…