Following other Asian countries, the Bank of Japan (BoJ) started trials for its own central bank digital currency (CBDC). The trials serve as part of the first phase of its Proof of Concept (Poc) which will last for a year and end in March 2022. It’s still unclear whether the central bank wishes to proceed with CBDC. Nevertheless, the technical feasibility of a digital Japanese yen will be tested during this year.
According to a CBDC document published by the central bank, two phases for PoC will be followed by a pilot. The first stage of PoC Phase 1 began on Monday, April 5 and “The Bank will develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument — namely, issuance, distribution, and redemption.”
Asia is leading in CBDC development
Japan is not alone in investigating the use of CBDCs. China piloted a digital yuan, known as digital currency electronic payment (DCEP), and tested it in four major cities. After having studied the development of a CBDC since 2017, Cambodia has officially announced the launch of Bakong, its central bank-backed digital currency which supports transactions in the dollar and riel. Meanwhile, the Bank of Thailand and the Hong Kong Monetary Authority (HKMA) had successful trials of a Distributed Ledged Technology (DLT) for cross-border fund transfers. India, Indonesia, Vietnam, the Philippines, and Korea are also developing and experimenting with their own versions of CBDCs.
IS the US running behind in CBDC?
Jerome Powell, the chair of the Federal Reserve, when asked about a U.S. CBDC, commented, “It’s a very, very large, complex project.” He said that the U.S. doesn’t have to be first and mentioned that the introduction of any new currency format would require the involvement of the Congress.
The future of traditional currencies is being challenged and new formats of digital currencies are starting to emerge all around the world. Could this impact financial markets and national currencies? Could it affect the prices of cryptocurrencies as well? These are scenarios that cannot be ruled out. Follow the markets and news on CBDCs, search for signals on how they could move the markets and trade CFDs on currency pairs and cryptocurrencies with the 200% Deposit Bonus and your deposit tripled.