Japan Begins Working on CBDC Partnering with 3 Megabanks

Japan Begins Working on CBDC Partnering with 3 Megabanks.

An article in a major newspaper today reports that the Japanese central bank is exploring the use of central bank digital currency (CBDC) with the country’s major financial players.

A CBDC is centralized, it is controlled by a central power—usually the government or central bank. The research and release of CBDCs around the world are at various stages.

Working with 3 big banks and regional banks

Nikkei reported Wednesday that the Bank of Japan (BOJ) will trial a digital yen next year with three megabanks and regional banks.

A CBDC may be released by the BOJ in 2026 if all goes according to plan, the newspaper noted.

Previously, in April, Reuters reported, the BOJ began experiments on issuing digital currency. In a statement, the BOJ said the first phase of the experiment would test the technical feasibility of issuing, distributing, and redeeming a central bank digital currency (CBDC) until March 2022.

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As a next step, the BOJ will move on to reviewing more detailed functions, such as setting limits on the amount of CBDC that each entity is allowed to hold, according to Reuters.

Exploring how deposits and withdrawal works

Today’s report indicates that the BOJ’s experiment will explore the use of a digital yen for deposits and withdrawals.

A number of central banks are devising digital currencies in order to modernize their financial systems, ward off the threat posed by cryptocurrencies, and speed up payments domestically and internationally.

Meanwhile, China is far ahead of the curve. Some citizens there can spend the digital yuan. In 2020, The Bahamas established its own CBDC.

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On the other hand, a major U.S. financial institution announced last week that it was testing a digital currency platform with the Federal Reserve.

CBDCs, however, have drawn the ire of privacy advocates concerned about the state’s ability to spy on citizens.

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Jamilatul Mahmudah

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