Bank of Japan Rolls Out Plans for the Testing of Digital Currency

The Bank of Japan governor recently announced that the apex bank would start experimenting with Central Bank Digital Currency (CBDC) by spring. Haruhiko Kuroda emphasized that the central bank has no plans to issue a CBDC. However, the bank must ‘prepare thoroughly’ for the possibility of a digital yen in the future. 

Kuroda predicted a possible date for the start of the experiments when he said,

“Since the release of ‘The Bank of Japan’s Approach to Central Bank Digital Currency’ in October 2020, the Bank of Japan has been preparing to conduct experiments in accordance with this approach. We are finally scheduled to begin these experiments in spring 2021.”

Kuroda also claimed that 60% of banks are already considering the pros and cons of CBDC issuance and conducting a Proof-of-Concept test.

The governor further explained that the bank has to prepare thoroughly to respond to changes in events appropriately. The bank also has to make sure that the general payment and settlement system is stable and efficient.

The first phase of the experiment will have the bank working with private businesses. The bank will test a digital currency’s fundamental functions and how to issue and circulate the currency. This phase may take about a year. In the second phase, the bank will observe the electronic currency’s potential as a payment method.

As the demand for digital currencies keeps increasing, central banks worldwide are kickstarting plans to move to a digital future. The growing global increase in crypto adoption has sparked varying reactions. While some are in support, others have responded to this by banning, regulating, or creating their digital currency.

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