The Bank of Japan will launch a CBDC pilot programme in April.
The announcement was made by Shinichi Uchida, Executive Director of the Bank of Japan, at the fifth meeting of the Liaison and Coordination Committee on Central Bank Digital Currency (CBDC).
He said the aim of the pilot programme would be two fold: first, to test technical feasibility and secondly, to gain insights from private businesses on designing a CBDC ecosystem, were it to be more widely implemented.
“Regarding the first point, in the CBDC system, there is a need for an interlinking of various systems ranging from the central bank to users through intermediaries, intermediary network systems, and other stakeholders. [Under the pilot programme] we plan 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,” Uchida said.
“As for the second point, our hope is that the pilot programme will lead to improved designs through discussion with private businesses. Topics on the agenda currently include measures and potential challenges for connecting the experimental system with external ones, alternative data models and architectures for offline payments.
Uchida also told those in attendance that the programme would look at how best to provide value-added services and use new technologies or functions if a touchpoint with users arises.
To achieve this, the Bank of Japan plans to establish a CBDC Forum and invite private businesses engaged in retail payments or in related technologies to participate.
The latest move towards a CBDC follows earlier Proof of Concept tests (PoCs) that took place in two phases – phase one beginning in April 2021, and phase two beginning in April 2022.
PoC Phase one confirmed that the basic transactions related to CBDC, or a series of transactions such as issuance, payout, and transfer, could achieve the processing performance required for frequent and low-value retail payments.
PoC Phase two, which is due to end next month, has already confirmed that the CBDC system can be maintained whilst implementing additional functions. For example, checking whether end users’ CBDC holdings and transactions do not exceed the upper limit imposed on each, even when end users hold multiple accounts.
The Bank of Japan said it plans to gradually expand the programme in a phased manner but currently does not expect any actual transactions to take place among retailers and consumers. Only simulated transactions will be settled in the test environment.
