The Central Bank of Japan published a research report yesterday, announcing that it will test the technology of the central bank’s digital currency (CBDC), hoping to digitize Japanese yen cash. This is the first time the Bank of Japan announced that it will conduct a proof-of-concept on CBDC, but the actual timetable for launching the market has not yet been finalized. However, the digital version of the yen is not necessarily applied to blockchain technology, because a central system can quickly process a large number of transactions.
In February of this year, Japan and the United Kingdom, Canada, Sweden, Switzerland, and the European Central Bank formed an alliance to study CBDC and will share the results of their research. After several months of preparation and planning, the Bank of Japan announced that it will test the CBDC plan, and will focus on the two aspects of its technology in general and stability. The Bank of Japan hopes to design a CBDC that can be used by users without a smartphone because local smartphones are not fully popular.
At the same time, because of the earthquake zone, Japan has the opportunity to have a large-scale power failure after the earthquake. Therefore, the central bank wanted to allow users to use CBDC in the event of power outages and network interruptions. As for the centralized or decentralized system to process transactions, the Bank of Japan has shown that both have advantages and disadvantages. For example, when it is necessary to quickly process a large number of transactions at the retail level, the centralized system has advantages. However, in the case of limited transaction volume, priority should be given to the flexibility and opportunities in future development, and the decentralized system can be considered.
At present, central banks in many places around the world are actively paying attention to the development of CBDC. For example, the People’s Bank of China started testing in Shenzhen, Chengdu, Suzhou and Xiong’an in April this year. As for the Fed, it has also indicated earlier that it will evaluate the benefits and potential opportunities of CBDC , and does not want to lag behind the world in the future, but the agency does not agree that private institutions are involved in the design of CBDC.