The Bank of Japan says its central bank digital currency project will be clear by 2022 as it is still in the research and study phase.
The Japanese ruling party is confident that plans for a central bank digital currency (CBDC) will be clear by next year. Several countries have started researching and studying the best ways to develop and issue CBDCs, and Japan is one of them.
Hideki Murai, the head of the ruling Liberal Democratic Party’s panel on digital currencies, told Reuters: “By around the end of next year, we’ll have a clearer view of what Japan’s CBDC would look like.” In April, the Bank of Japan (BOJ) initiated the first phase of its CBDC experiment. The BOJ is expected to launch the second phase by next year, where it would lay out some key functions of a digital yen.
The apex bank is expected to identify the entities that would serve as intermediaries between the BOJ and deposit holders in the second phase. Although there is no immediate decision on whether to issue a CBDC, further details on its design could lead to debate on how the Digital Yen issuance could affect Japanese financial institutions.
Murai said the design could determine whether the BOJ’s argument that a CBDC will not crowd out or meddle in private businesses is valid. Similar to other leading countries, Japanese banks are facing tough competition from fintechs offering various online settlement means.
“If the BOJ were to issue CBDC, it would have a huge impact on financial institutions and Japan’s settlement system. CBDC has the potential to completely reshape changes occurring in Japan’s financial industry,” he added.
Murai urged the BOJ to roll out a design that would make the Digital Yen compatible with other CBDCs. Doing so would change the nature of business between Japan and other countries.