The Bank of Japan (BOJ) said on Monday that it has begun experiments to study the feasibility of issuing its own digital currency. The move sees it join other global central banks in exploring options in the digital sector.
According to the regulator, the first phase of experiments will be carried out until March 2022 and will focus on testing the technical feasibility of issuing, distributing, and redeeming a central bank digital currency (CBDC). It will then move to the second phase of experiments, which will scrutinize more detailed functions, such as whether to set limits on the amount of CBDC each entity can hold.
The BOJ’s plan to begin experimenting on how to operate its own digital currency was announced in October. Its Executive Director Shinichi Uchida said last month that if necessary, the bank will launch a pilot program that involves payment service providers and end users.
“While there is no change in the BOJ’s stance [that] it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step,” Uchida told a committee of policymakers and bank lobbies looking into CBDC.
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The Bank of Japan’s announcement comes as global central banks are forging ahead with initiatives for developing their own digital currencies. They seek to modernize financial systems and ward off the threat from cryptocurrencies, as well as speed up domestic and international payments.
The Central Bank of Russia (CBR) plans to launch its first digital ruble prototype this year. The CBR is set to publish the roadmap for development of the digital currency soon, and its prototype should be ready by autumn, according to the head of the State Duma Committee on the Financial Market, Anatoly Aksakov.
In China, massive pilot testing of digital yuan is currently underway in major cities across the country. The nation’s central bank plans to have its sovereign digital currency ready in time for the 2022 Winter Olympics.
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