Japan to Trial Digital Yen With Three Megabanks in Early 2023

  • The Bank of Japan will collaborate with three Japanese megabanks on a CBDC with offline functionality starting early next year.
  • The central bank plans to experiment and stress test the potential digital yen for two years, and make a final decision on whether to widely issue it by 2026.
Bank of Japan headquarters in Nihonbashi, Chūō, Tokyo

Bank of Japan headquarters in Nihonbashi, Chūō, Tokyo. Kaisuke Ota/Nikkei Asian Review

The Bank of Japan (BoJ) is planning to conduct a central bank digital currency (CBDC) tests early next year with the participation of three megabanks, local news outlet Nikkei reported on 23 November.

According to the publication, the pilot program is scheduled to begin in spring of 2023, and will provide a demonstration of how a digital yen could be issued in the country. The central bank of Japan will cooperate with several major private banks and organizations to identify and solve any problems related to customer deposits and withdrawals. One of the priorities of the BoJ is that the CBDC has offline functionality, enabling it to operate during natural disasters.

The central bank also revealed that it plans to proceed with its CBDC experimentations for about two years, and make a final decision on whether to issue a digital yuan to the public sometime in the 2026. Although Nikkei’s report did not name the banks that will participate in the experimentation, the “three megabanks” likely refers to the Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho financial groups.

The BoJ is the latest in a series of central banks that have launched some type of CBDC research and development initiatives. China, however, is the one leading the race for a digital currency, with the People’s Bank of China (PBoC) expanding its digital yuan trials to WeChat earlier this year, one of China’s most popular payment services.

Last month, the Reserve Bank of India launched a wholesale CBDC pilot with nine locally operated banks, and this Tuesday also revealed it is preparing to launch a retail pilot for the digital rupee in December, in collaboration with the State Bank of India. Starting January 2023, Australia’s central bank will also be conducting CBDC trials to identify and understand innovative business models, use cases, benefits, risks, and operational models for a CBDC in the country.

Discussion
Related Coverage
India’s Central Bank to Launch Wholesale CBDC Pilot in November
  • The Reserve Bank of India will launch a wholesale CBDC pilot on Tuesday, and has selected nine locally operated banks to participate in the trial.
  • The central bank noted that it also plans to conduct retail CBDC trials within a month, allowing households and businesses to make payments using the digital rupee.
October 31, 2022, 4:33 PM
rbi

Shutterstock

MasterCard to Help Banks Offer Crypto Trading
  • The new program will see MasterCard act as a “bridge” between Paxos and financial institutions, allowing them to offer crypto trading services to their clients.
  • The payments giant will also assist institutions with regulatory compliance and security, two reasons banks cite for avoiding the asset class.
Australia to Completed CBDC Pilot in Q1 2023
  • The Reserve Bank of Australia is looking for industry participants to make submissions of CBDC use cases it can test during its eAUD pilot.
  • Selected use cases will be announced in December, while the actual CBDC pilot will start in January and end in April, with its results being published in the “middle of 2023”.