The Bank of Japan decided to launch large-scale testing of the digital yen after two years of research into the prospects of this project.
The launch of digital currency testing is scheduled for April 2023. Earlier, the Japanese financial regulator conducted two checks on the concept of virtual money. During these procedures, the main elements of the release were tested. The specifics of making payments using the digital yen and financial operations in the field of circulation of virtual money were checked.
Attention was also paid to checking the stability of the system during the implementation of various scenarios. This part of the procedure was aimed at studying the level of effectiveness of the digital yen in the plane of practical application.
BoJ Executive Director Uchida Shinichi, commenting on the upcoming launch of large-scale testing of the digital national currency, said that this project is focused on two goals. One of the goals is to check the technical feasibility not fully covered by the POCs. The second focus will be on practical testing of the effectiveness of skills and the current degree of understanding of private business in terms of technology and operation for the transformation of the CBDC ecosystem into a social event.
As part of the testing program, a common system for experiments will be created in which the core, intermediate network systems, and end devices will be configured in an integrated manner.
The upcoming testing project includes simulating transactions with retailers and consumers along with the creation of a CBDC forum with private sector institutions in the payment space. The testing does not envisage actual transactions between retailers and consumers.
The Japanese card giant JCB has already established cooperation with Idemia identification specialist and fintech Soft Space in order to study the specifics of using the digital yen in retail stores.
Uchida Shinichi said that studying the structure of digital money in a step-by-step way and ensuring the most honest discussion of this project with the private sector are necessary conditions for the positive adoption of CBDC in society. He noted that similar approaches have been used by other countries with developed economies.
The decision of the Bank of Japan is a response to trends in the finance sphere. Currently, digital payments are in demand, and the current trend indicates a further increase in consumer interest in this type of financial operation.
The main advantages of CBDC are a high level of efficiency and expanded access to financial resources. But there are also risks associated with the use of digital currency, including cyber attacks, additional opportunities for illegal economic activity, and the creation of new forms of inequality.
As we have reported earlier, Bank of Japan Toughens Monetary Policy.