Japan would choose a simple CBDC design, according to a BOJ executive

According to a Bank of Japan (BOJ) executive, Japan’s planned central bank digital currency (CBDC) would have a basic design and be compatible with existing private payment services.

The Digital Yen: A Simple Model

The comment was delivered by Shinichi Uchida, the Bank of Japan’s executive director, at the second Central Bank Digital Currency Liaison Council on Friday (October 15, 2021). According to Uchida, the digital yen should be designed to be used anywhere and to operate with existing payment methods.

According to the BOJ executive, the cohabitation of CBDC and private-sector payment networks will be horizontal and vertical. When many private payment networks coexist with the CBDC system, this is referred to as horizontal coexistence. The BOJ official described vertical cohabitation, which Uchida claimed would need a basic paradigm, as follows:

“For vertical coexistence, the CBDC provided by the Central Bank should be a relatively plain, easy-to-cook material. For example, in one wallet provided by the private sector, it may be possible to use CBDC in addition to private payment methods, or it may be possible to add new services after using CBDC.”

Meanwhile, in April 2022, the BOJ will move to the second stage of its digital yen trials. One of the key aspects that would be examined at this stage is whether or not it is essential to limit how much each object may hold.

While others make progress, Japan is not ready for CBDC.

On the other hand, Uchida restated the central bank’s position that it is not in a rush to issue a CBDC. Meanwhile, more central banks worldwide are becoming interested in CBDC, with some even collaborating on digital currency initiatives.

The central banks of Australia, Singapore, South Africa, and Malaysia teamed up with the Bank of International Settlements (BIS) in September to launch a pilot project to test the use of CBDCs for cross-border settlement and remittances.

The Bank of Korea appears to be taking its digital won initiative seriously, having set aside nearly 5 billion won ($4.1 million) for it. Ground X, a blockchain subsidiary of Internet business Kakao, was also chosen as the BOK’s technical partner for the digital currency. In addition, a CBDC pilot project in South Korea is set to expire in December 2021.

Ghana, Vietnam, Nigeria, and Jamaica are the other central banks working on their different CBDC initiatives. In addition, a new organization was recently established to aid in the growth of the UK CBDC.

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