The Bank of Japan is preparing to begin testing its central bank digital currency (CBDC), the digital yen, with the help of three regional banks and companies. The pilot program, which is expected to last two years, will focus on testing the currency through several businesses and testing its functionality in an environment without an internet connection.
Bank of Japan to Test Digital Yen CBDC
The Bank of Japan plans to test the functionality of its CBDC model, the digital yen, in partnership with three major banks and several local companies, according to Nikkei.
The results obtained from the pilot program, which should last for two years, will be decisive in the government’s decision to create a real digital yen. The pilot program will include various tests for the currency to determine its behavior during daily transactions, such as deposits and withdrawals. In addition, the bank will test its services in emergency situations, when the Internet connection is limited or absent.
This will be the first CBDC trial by the Bank of Japan in collaboration with other financial institutions. Since April 2021, the bank has been conducting a proof of concept testing the power of the digital yen and its functionality and features. The institution announced the second phase of these exams in March 2021.
No decision on publication
However, these tests are still focused on the function of the currency and no decision on issuing a digital yen has been made. Bank of Japan President Haruhiko Kuroda said on March 29 that the bank has no plans to issue a CBDC at this time and that these goals are to facilitate “responding to changing conditions in an appropriate manner, to ensure the stability and efficiency of the system” all payments and arrangements.
The acceptance of digital money at the national level should be supported by a legal framework, which should define the role of money and the future of private banking and the resulting structure.
Other countries like China have launched their CBDC. The European Union is currently conducting a two-year test for the ability to adopt a digital euro, and the Federal Reserve Bank of New York announced on November 19 that it will launch a digital dollar that will promote the country.