Japan Kicks Off Central Bank Digital Currency Experiment

The Bank of Japan will reportedly join a host of other countries in testing a central bank digital currency (CBDC) next year in experiments with three of the country’s banks.

According to a report by Nikkei Wednesday (Nov. 23), the bank will conduct the tests in the spring of next year, working with private lenders and other organizations to test if there are any issues related to bank deposits and withdrawals.

The test will also try to determine if a digital yen will survive natural disasters and in places without internet access. These experiments will last about two years, with the bank deciding on whether to issue a digital yen in 2026, Nikkei said.

The central bank says other financial institutions have been eager to join the program, Nikkei reports. The BOJ is also shopping for FinTechs and IT companies to develop ID verification tools and other security measures.

PYMNTS has reached out to the bank for comment.

With these experiments, Japan will join a number of countries whose central banks have launched CBDC pilots.

Earlier this month, the banks of France, Singapore, and Switzerland launched Project Mariana, a collaboration trialing their experimental CBDCs and decentralized finance (DeFi) protocols.

In this six-month experiment — said to be the first of its kind, and involving hypothetical CBDCs from each of the three countries the project will test cross-border CBDC trading and settlement.

One day later, the Monetary Authority of Singapore (MAS) debuted Ubin+, a program to test the use of a wholesale CBDC in cross-border foreign exchange settlement.

The central bank said in a news release that the program will study “business models and governance structures for cross-border foreign exchange (FX) settlement, where atomic settlement, based on digital currencies, can improve efficiencies and reduce settlement risks compared to existing payment and settlement rails.”

Convenience drives some consumers to store their payment credentials with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze consumers’ dilemma and reveal how merchants can win over holdouts.

November 24, 2022