By Bitcoinist - 10 months ago - Reading Time: 2 minutes
Bank Of Japan Begins Pilot For Japanese CBDC
The Bank of Japan has announced the launch of a three-year pilot program for its central bank digital currency (CBDC), a digital version of the yen. With the world’s third-largest economy, a successful launch of a digital yen could pave the way for CBDCs to become mainstream in Japan and transform how people pay for everything in their day-to-day activities.
Exploring CBDCs For The Japanese Economy
Japan joins a growing list of countries exploring a digital version of their currency. Although CBDCs aren’t really cryptocurrencies, their inspiration comes from the innovation that comes with blockchain technology.
In the two years leading up to the pilot launch, the Bank of Japan conducted a series of proof-of-concept trials to determine the practical potential of central bank digital currencies in Japan using three undisclosed local banks and other regional banks.
Phase One began in April 2021 and ran through March 2022. In this phase, three ledgers were tested with 100,000 users transacting through 5 intermediaries with between 500 and 3,000 transactions per second.
Phase Two began in April 2022 and ran through March 2023. In this phase, a shared token-based ledger design was tested to assess the impact of additional features on the first year-long experiment.
During the pilot program, the end-to-end process flow will be tested to explore potential challenges with external systems. A CBDC Forum will also be created to relate with ideas from private businesses related to retail payments.
The Future Of Money In Japan
A digital yen could significantly impact Japan’s economy in several ways. Financial experts predict that by 2030, up to $5 trillion of CBDCs could be circulating in major economies worldwide, with a billion-plus users using blockchain and distributed ledger technology in their everyday lives.
If the pilot is successful, Japan may become the first major economy to issue a CBDC. However, Japan isn’t the only country exploring the possibility of injecting CBDCs into their economies.
The increasing interest in CBDCs worldwide shows how digital currencies could reshape finance. More than 114 countries are actively considering rolling out a CBDC. China recently launched pilot tests of its own CBDC, and countries like India and Australia are also on the heels of testing a pilot program.
Unlike cryptocurrencies, which are decentralized, central bank digital currencies would still give the central bank control over monetary policy. Meanwhile, cryptocurrencies offer more anonymity but are highly volatile monetary assets.
Original source: Bitcoinist