The Bank of Japan (BOJ) has announced plans to experiment with a Central Bank Digital Currency (CBDC) by evaluating how feasible it is from a technical standpoint.
BOJ plans to issue a digital Yen like their neighbors China, who are already in the testing phase of its digital Yuan.
This was made known via a report titled “Technical Hurdles for CBDC” published by BOJ. The bank revealed they plan to check the feasibility of CBDC from technical perspectives and will collaborate with other central banks and relevant institutions.
The Bank of Japan now joins central banks of China, Britain, Germany, France, Sweden, Thailand, Ghana and Switzerland, who have all shown interest in issuing or experimenting with a central bank digital currency (CBDC).
Some Major Bottlenecks
BOJ believes resilience and universal access are the two major bottlenecks associated with issuing a CBDC.
Universal access refers to providing access to everyone, including those who do not own a smart phone. It is estimated that 65% of the Japanese population own smartphones according to Nikkei in 2018.
“it is important to develop CBDC to be available to a variety of users”.
Resilience in this context refers to offline availability when electric power is down. The Bank of Japan stressed the importance of accessibility in any kind of environment, even in emergency situations such as an earthquake or hurricane.
Will the Digital Yen be issued on a Blockchain?
An important aspect of concern for the digital yen is if it will be issued on a Blockchain or a centralized system.
The BOJ seems to prefer the option of issuing the digital yen on a centralized system and not use distributed ledger technology (DLT).
Both centralized and decentralized types have pros and cons […] in the case of massive transactions for retail use cases in advanced countries, it is better to adopt the centralized type […] in the case where the amount of transaction is limited and resilience and future possibility are prioritized, there is room to consider the decentralized type.”