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The bank plans to invite private companies to participate in a CBDC Forum, which it will set up.
As the CBDC effort intensifies across many countries, the Bank of Japan has launched a pilot program for its CBDC. The executive director for the central bank, Uchida Shinichi, talked about the development on the 17th of February. In an opening speech at the CBDC committee meeting, he explained the progressive processes concerning the matter. The pilot program in Japan for “digital yen” will begin after the completion of the Proof of Concept (PoC) experiments.
Also, the Financial institution initiated the PoC to test the “technical feasibility of the core functions and features required for a CBDC. The first phase started in April 2021, and the Bank of Japan carried out expertise on a CBDC ledger. The assessment confirmed that CBDC basic transactions could function in the processing performance for frequent and low-value retail payments. The second phase of the Proof of Concept began in April 2022 when the bank further tested the digital yen by introducing more techniques than the first phase. The central bank stated:
“While this phase is scheduled to continue through this March, we have already confirmed that the processing performance of the CBDC system can be maintained even with additional functions whose implementation is challenging. One such function is to check whether end users’ CBDC holdings and transactions do not exceed the upper limit imposed on each, even when end users hold multiple accounts.”
Bank of Japan to Launch CBDC Pilot Program
Following the findings from the PoC tests, the Bank of Japan is now moving on to roll out the CBDC pilot program in April. The program is designed for two major reasons. Firstly, to test the technical feasibility that was not entirely conducted by the two stages of Proof of Concept. Against the central system being the subject of PoCs as done in the previous tests, the financial institution plans to “develop a system for experiments, where a central system, intermediary network systems, intermediary systems, and endpoint devices would be configured in an integrated manner.” In addition to testing the end-to-end flow, the bank will also look out for challenges that may spring up while connecting with external systems.
Also, the Bank of Japan wants to include private businesses in redesigning the CBDC. The bank plans to invite private companies to participate in a CBDC Forum, which it will set up.
“As for how to proceed with the pilot program, we will launch the experiments with narrowed objectives, gradually expanding the scope of our experiments in a phased and planned manner.”
Conclusively, Shinichi said the central bank remains committed to designing digital yen to be acceptable to end users and society.