While Japan’s CBDC ambitions are still in the research phase, Bank of Japan official Shinichi Uchida has stated that the central bank’s design philosophy for the digital yen will be simplicity-based.
As per Reuters, Uchida stated this during a speech on Friday in which he called for mechanisms to guarantee the CBDC coexists with current private payment systems.
Vertical integration of the digital yen into the private sector payment matrix would necessitate a straightforward CBDC architecture, according to Uchida.
Providing a framework for individuals to utilize both the CBDC and electronic payment services from one wallet, allowing smooth switching between the two channels, may be part of this basic design.
Vertical integration, as per Uchida, will encourage the private sector to embrace Japan’s CBDC, resulting in more useful services.
The BOJ has launched early proof of concept research on the potential of releasing a CBDC, as reported earlier by Cointelegraph. According to reports, the second stage of the digital yen research will begin in Q2 2022.
During China’s digital currency electronic payment initiative, Japan is one of many countries in the Asia Pacific financial theater considering the benefits of launching a central bank digital currency.
The BOJ confirmed the formation of a Liaison and Coordination Committee in March, which will bring together public and private sector players to collaborate on the digital yen CBDC experiment.
Japan’s CBDC research may include looking at overseas interoperability with other sovereign digital currencies, perhaps counter China’s digital yuan on the global arena.
Collaboration on CBDC issues across international borders is also becoming a major emphasis topic for numerous countries building their national digital currencies.
In the meantime, international financial institutions such as the Bank for International Settlements are pushing for CBDCs to combat the spread of digital currencies.