Japan advances digital yen trial as PoC concluded
The Bank of Japan (BOJ) today published the findings of the second phase of its digital yen’s proof-of-concept (PoC) experiment, joining a growing number of countries seeking to catch up to front-runner China.
The results indicate that the CBDC pilot project, which kicked off in April, has progressed as scheduled. The most recent phase, spanning from April 2022 to March 2023, focused on exploring additional functions to complement the basic ledger functions examined in the first yearlong experiment.
According to the BOJ’s report, the second phase involved testing the technology necessary to implement upper limits on CBDC holdings. These limits are considered essential safeguards to ensure the stability of the nation’s financial system, particularly in the event of a sudden shift from bank accounts to the CBDC.
The trial also included scenarios where a single user possessed multiple accounts with multiple intermediaries. Additionally, user convenience in initiating and scheduling payments was evaluated during this phase of the experiment to assess the CBDC’s ability to facilitate smooth payment transactions.
Earlier in March, Japan’s Finance Ministry created an advisory panel to look at the feasibility of issuing a central bank digital currency.
The launch of the panel coincides with the start of a CBDC pilot program following two years of proofs of concept (PoC). The BOJ, financial institutions and other private-sector participants will conduct simulated transactions under the pilot program in a test environment. However, the central bank does not plan to conduct actual transactions among retailers and consumers.
Additionally, three Japanese banks are set to develop a payment system that integrates their stablecoins on a public blockchain while satisfying legal requirements.
Japan’s financial regulator was also seeking feedback on allowing domestic distributors to handle stablecoins issued outside the country on the condition that they maintain sufficient collateral.
Japan’s parliament passed a bill in June 2022 to regulate crypto tokens whose value is pegged to that of the yen, dollar, or other currencies. The new law is aimed at curbing the financial system risks of stablecoins and strengthening protections for investors.
Under the new law, stablecoins can be issued by licensed banks, registered money transfer agents and trust companies. Stablecoin licenses are expected to be issued only to highly credible businesses in charge of issuing and managing them, as well as intermediaries responsible for circulation.
