Bank of Japan starts the first phase of CBDC

Bank of Japan starts the first phase of CBDC

BUSINESS | April 5, 2021 | WOZINGA NEWS

Bank of Japan starts the first phase of CBDC

  • Bank of Japan begins the Central Bank Digital Currency proof-of-concept. 
  • Blockstream and mesh networks are the potential answers in dealing with network and electrical failures due to natural disasters.
  • Japan and other Asian countries aim to establish a digital economy.

By Marielle Petere Wozinga Journalist

JAPAN—Central Bank Digital Currency proof-of-concept starts Monday, and the expected completion will be on March 2022, the Bank of Japan announced.

Bank of Japan CBDC plan gives the importance of ensuring the efficiency and stability of the payment and settlement system in the implementation of digital currency. At the same time, this CBDC experiment focuses on bank functions like payment, issuance, redemption, and distribution.

Bank of Japan and CBDC testing

Bank of Japan begins the CBDC first phase testing today, April 5. Last year, BoJ stated the original digital currency testing plan would be in October 2021. The central bank noted the CBDCs experimental-development approach as payment.

Geographically, the digital currency experiment is considered challenging. This Land of the Rising Sun is prone to natural catastrophes, such as volcanic eruptions, cyclones, earthquakes, and tsunami.

However, exact solutions for the expected disasters had not addressed last year. The development of mesh networks in long-wave radio transmitters and satellite networks via Blockstream are the potential answers in dealing with the network and electrical failures for blockchain-based currencies.

So, back in October 2020, the central bank emphasized the significance of offline digital currency availability. Also, the collaboration of the Bank of International Settlements, BoJ, and other six banks drew attention to the CBDC core features and its foundational principles.

Asian CBDC development

In this case, Japan is one of the Asian countries that adopt blockchain ledger technology. The announcement of central banks’ collaboration from Japan and other European countries with BIS was in January 2020 for digital currency research.

Additionally, the Asian Multiple Central Bank Digital Currency project proceeds with the proof-of-concept development phase.

For this project, the Digital Currency Institute of the People’s Bank of China collaborates with the United Arab Emirates Central Bank, the Hong Kong Monetary Authority, and the Bank of Thailand.

Meanwhile, M-CBDC aims to offer cross-border network foreign transactions on payment-versus-payment service. This cryptocurrency emergence pushes the Asian governments to develop digital currency like Bitcoin (BTC), Ethereum (ETH), and altcoins. 

Right now, China leads the curve when it comes to CBDC creation with experimental biometric ID hardware wallets to its accelerated digitalization of yuan. Besides, China launched a digital vaccine passport via smartphone payment app and WeChat messaging app. 

Japan and other Asian countries aim to establish a digital economy. This digital exploration of central banks expects to attract numerous firms and institutions in Asia. 

Can central banks in Asia attract various companies and institutions due to CBDC?

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