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Wednesday, January 27, 2021

Japan’s central bank to start CBDC tests next year

  • The Bank of Japan is preparing to starts the tests of its CBDC in FY 2021, starting in April.
  • A new report issued by the bank reveals that its coin will be general-purpose crypto, suitable for everyone.
  • However, the bank doesn’t plan to issue its coin unless there is a specific need for it.

Central bank digital currency (CBDC) development has seen a lot of progress in 2020, as central banks of most advanced nations rushed to develop their own coins. Many have already started testing, with China still being in the lead. while others are advancing with development, and are planning to start with the tests soon. One example of this is Japan, which revealed when its tests are going to start.

Bank of Japan is preparing the coin, but it won’t use it

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According to the Bank of Japan, its CBDC tests are going to start at the beginning of FY 2021, which will be next April. While the bank stressed that it aims to start as early as possible, it likely won’t be ready before this time.

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The plan was revealed in a report released yesterday, October 9th, called The Bank of Japan’s Approach to Central Bank Digital Currency. The report gave a rather comprehensive description of the bank’s position regarding the coin.

The report notes that, from the viewpoint of ensuring the efficiency and stability of the payment and settlement systems, the bank thinks that it should be ready to respond to potential changes in circumstances. In other words, the bank plans to be ready if the situation changes in a way where it has to start using a CBDC.

However, its CBDC will be a general-purpose coin, and it aims to act in a way that will allow anyone to use it, be they regular households or entire companies. Its coin was meant to complement the current systems, rather than challenge them.

The bank plans to start issuing it in case the cash circulation drops, or similar problems that might emerge in the future. However, it doesn’t plan to issue it without a very good reason. It simply aims to create it and be ready for economic challenges, but it won’t try to change its current systems by issuing it now.

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