The Bank of Japan (BoJ) announced on Thursday that it would experiment in the CBDC field. The idea is to check the feasibility of this type of project from a technical point of view.
Bank of Japan and CBDC
BoJ wants to digitize cash. For the first time, the bank admitted that it would start testing on the digitization of the yen. The work schedule has not yet been disclosed.
In the report entitled “Technical obstacles for CBDC” the bank said that “Check the feasibility of the CBDC from a technical point of view, work with other central banks and relevant institutions, and consider issuing CBDC.”
In February, information appeared that the central banks of the United Kingdom, the eurozone, Japan, Canada, Sweden and Switzerland announced a cooperation plan for research into the issue of digital currencies.
BoJ believes there are two main technical obstacles: universal access and resilience. It is about ensuring the availability of digital currency for everyone, including people without a smartphone. Surprisingly, according to Nikkei, only 65 percent of Japanese people have smartphones.
In turn, “resistance” refers to the availability of offline currency when there is no electricity. BoJ emphasized the importance of accessibility in any environment, even in emergencies such as an earthquake.
BoJ is also wondering whether to use blockchain in the project. The centralized system has the advantage that “Has large capacities and high transaction speed”, but the whole system may crash immediately due to the existence of one point of failure.
In contrast, DLT-based CBDC can overcome a single point of failure and exhibit greater resilience, but require more transaction time because blockchain networks require consensus among multiple validators.
“Both centralized and decentralized types have advantages and disadvantages […] for mass transactions, for retail applications in developed countries, it is better to adopt the centralized type […] where the number of transactions is limited and resilience and future opportunities are prioritized, there is room for consideration of the decentralized type. “
It is worth noting that Japan joins the race in which other countries are already taking part. In April, Chinese digital yuan was tested in the cities of Shenzhen, Chengdu, Suzhou and Xiongan.