The Bank of Japan (BoJ) has commenced the Proof-of-Concept (PoC) for its proposed Central Bank Digital Currency (CBDC) which will be the equivalent of a digital Yen. According to an official press release from the monetary authority, it has been undertaking a series of preparations in order to be ready to begin conducting experiments on the CBDC project this fiscal year, and it noted the Phase 1 of the PoC which starts today will run for one year, until March 2022.
For most Central Banks developing their own fiat-backed CBDCs, the PoC stage helps them consider in proper perspective the technical feasibility of pursuing the project.
While different Central Banks are liable to develop their targets at the Proof-of-Concept stage, the Bank of Japan noted it aims to test the core functions required for a successful CBDC rollout.
“The Bank of Japan has been undertaking preparations to begin experiments on Central Bank Digital Currency (CBDC) in early fiscal year 2021, to test the technical feasibility of the core functions and features required for CBDC,” the Bank of Japan revealed in the Press Release. “As necessary preparations are now complete, Proof of Concept (PoC) Phase 1 begins today. In PoC Phase 1, the Bank plans to develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption. This phase will be carried out through March 2022, for a duration of one year.”
The Bank of Japan through the latest update did not ascertain the number of stages left for the CBDC rollout or the next steps it will take based on its discoveries.
CBDCs Are Becoming a Common Engagement Amongst Central Banks
The reality of the evolving global payment ecosystem has churned out a growing list of privately held cryptocurrencies and stablecoins continuous to give Central Banks around the world the impetus to keep pursuing a speedy CBDC development, and eventual rollout.
Besides the Bank of Japan, other apex monetary authorities including the Reserve Bank of India, the Bank of Thailand, and more are mulling the idea of a CBDC rollout to trail the likes of the People’s Bank of China (PBoC) and the Central Bank of the Bahamas (CBoB) with considerable progress in the regard.
While sovereign nations are changing with the times, their version of a digital currency will likely lack the privacy, decentralization, and security that Bitcoin (BTC), and other cryptocurrencies offer.
