The Bank of Japan has released a report on digital currency detailing the institution’s approach to Central Bank Digital Currencies (CBDCs). In the report, BOJ notes that there is going to be a surge from the public for central bank digital currency due to the rapid development of technological innovation.
The report highlighted what to expect from a central bank-issued digital currency. According to BOJ, CBDCs will complement, not replace, cash, and focus on making payment and settlement systems more convenient. According to the report:
“While the Bank of Japan currently has no plan to issue CBDC, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the Bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner.”
The report also highlighted some of the beneficial CBDC features like universal access, security, and instant payment capabilities.
CBDC experiments set for April 2021
The institution also plans to have financial institutions and other private entities work as intermediaries between the central bank and users. The banks want companies and households to hold deposits directly with the BOJ if the plan goes through.
The report highlights the broader BOJ approach to review how it can issue general-purpose central bank digital currencies (CBDC).
As a result, the BOJ will carry out experiments on basic functions core to issuing central bank digital currencies. The bank will first test the technical feasibility of the core functions and features required for CBDC through a Proof of Concept (PoC). The bank aims to start PoC during the fiscal year beginning in April 2021.
BOJ adds to the growing list of central banks considering CBDCs. Notable banks include the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank, and the Federal Reserve System among others.