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The Bank of Japan will reportedly trial a proof-of-concept digital yen next year. According to Nikkei, the Japanese central bank is collaborating with three megabanks and regional banks to issue and pilot test a CBDC. The pilot will include a demo experiment for the digital yen in spring 2023.
The BOJ first started work on a CBDC two years ago. Since then, the bank has been experimenting with whether or not to issue a CBDC. Its latest experiment started in April and will last for a year. The trial experiment of a digital yen will kick off once that is completed.
No Decisions on Digital Yen Adoption Yet
While it remains unclear when the BOJ will issue its digital currency, BOJ Governor, Haruhiko Kuroda, stated that a retail CBDC could provide a more secure and seamless way to make settlements in Japan. Kuroda also called for increased efforts by policymakers globally to forestall the risks that may come with the mainstream use of private digital currencies.
A formal decision on adopting the digital yen will not happen until 2026. Before then, the BOJ will test to see how the transactions work with the CBDC and how internet access affects it.
Large Economies Increase CBDC Efforts
Japan’s announcement comes at a time when countries are racking up their efforts in researching and developing CBDC. Recently, the Reserve Bank of India announced intentions to commence a retail pilot of the digital rupee in December. Earlier in November, the Federal Reserve Bank of New York’s Innovation Center also announced the launch of a 12-week proof-of-concept CBDC pilot.
Other countries like China and Nigeria have already rolled out wallets for public use. Deputy Governor of the Bank of England, Jon Cunliffe also noted the bank was working on a digital pound. He stated that the working committee will release a consultative report detailing the next steps by the end of the year.
Interestingly, while other countries are launching CBDCs, Denmark has dropped out of the race in its entirety. Denmark noted challenges with the private sector and questionable value as the reason why it was pulling out.
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