Bank of Japan begins first digital currency proof of concept

The Japanese central bank has launched a proof of concept for its central bank digital currency, according to an official announcement on Monday.

Following initial preparations to test the technical feasibility of core CBDC functions and features in early 2021, the Bank of Japan is beginning CBDC testing in its first phase today. During this phase, the bank plans to develop a test environment for the CBDC system and conduct experiments on basic functions related to payment, issuance, distribution and redemption of a CBDC.

According to the announcement, this phase is expected to have been completed by March 2022.

The BoJ originally announced its plans to launch CBDC testing starting in October 2021. The bank emphasized that while it “has no plan to issue CBDC” from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, it is still important to prepare for “changes in circumstances in an appropriate manner.”

According to the original CBDC experiment roadmap, the bank expects to start a pilot CBDC program involving payment service providers and end-users after the completion of the second phase of testing. This phase will implement additional CBDC functions in the test environment developed in the first phase and determine their feasibility.

The BoJ recently announced the establishment of the Liaison and Coordination Committee to collaborate with both the private sector on the upcoming CBDC pilots.