In an announcement yesterday, the Bank of Japan described the two main technical barriers that the project must overcome – universality and resilience
In a report released yesterday, the Bank of Japan (BoJ) revealed that it would start a Proof of Concept (PoC) process with the digital yen. However, any timetable for launching the currency has not yet been announced by the bank.
The report, entitled “Technical obstacles to the CBDC“, described the objective of experiencing the CBDCs and the potential they have for a country like Japan and the world.
It is important to note that China is already ahead of Japan in the race to be the first major country to launch its own CBDC. According to reports, China is in the testing phase for the digital yuan and began piloting the comprehensive project in the cities of Shenzhen, Chengdu, Suzhou and Xiongan in April.
Thursday's report stated that the proposed experiment "would verify the CBDC's viability from technical perspectives, collaborate with other central banks and relevant institutions and consider the introduction of a CBDC".
The report explained that ensuring universal access and developing resilience were the two main technical barriers to the project. The first refers to providing access to the country's CBDC to everyone, including those without smartphones.
As of 2018, surveys suggest that only 65% of Japan's population had access to smartphones. Thus, BoJ believes that "it is important to develop CBDC to be available to a variety of users".
The BoJ also emphasized the need to develop resilience to ensure that the currency is available even when energy is weak, emphasizing that the digital yen will need to be available in emergency situations, such as an earthquake.
A centralized system presents the risk of collapse due to a possible single point of failure, but it can offer greater capacity and faster transaction speeds. And while a decentralized system is capable of overcoming a single point of failure, it will take longer to process transactions, as blockchain networks require consensus between multiple validators.
“Both centralized and decentralized types have pros and cons (…) in the case of massive transactions for retail use cases in advanced countries, it is better to adopt the centralized type (…) in the case where the transaction value is limited and resilience and future possibilities are prioritized, there is room to consider the decentralized type ”, concluded the report.