Japan's central bank, the Bank of Japan (BoJ), will test the technical feasibility of the core functions and features required for central bank digital currency (CBDC) through a Proof of Concept (PoC).
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In an official statement, the bank added it will also consider the need for a pilot program if necessary. While the bank has no plans to roll out its own CBDC, it plans to prepare thoroughly "to respond to changes in circumstances appropriately."
Due to "a possibility of a surge in public demand" for CBDC, the BoJ will carry out experiments with CBDC in a phased and planned manner:
- Phase 1. The regulator will develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument -- namely, issuance, distribution, and redemption;
- Phase 2. The regulator will implement additional functions of CBDC in the test environment developed in Phase 1 and test their feasibility
- Pilot program. Based on the PoC, the regulator bight consider a pilot program that somewhat reflects the actual design and functions of CBDC and involves end users.
Earlier in August, the newly-appointed financial regulator of the Financial Services Agency, Ryozo Himino, cautioned against promoting the crypto market claiming this step might not necessarily promote technical innovation.
Himino said that Japan should rather focus on issuing its own CBDC to prevent the economy from devastating consequences of the coronavirus pandemic.
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