CBDC to pilot
The Bank of Japan has released a report on the results of “Proof of Concept Phase 2” of its demonstration experiment on Central Bank Digital Currency (CBDC).
The Japanese version of the report was released last month, but the release of the English version yesterday has sparked renewed interest. In its report, the Bank of Japan has not yet decided whether to issue a CBDC (digital yen) in Japan, but it is important to continue preparations so that it can respond to future changes in the environment. I thought I was thinking.
In the final conclusion part, it is explained that the proof of concept, which is the process of confirming whether the basic idea of CBDC is technically feasible, will be completed in 2022 as planned because the purpose has been achieved. As previously announced, the company plans to conduct a pilot experiment from 2023.
In the pilot experiment, the following contents were carried out.
- End-to-end processing flow confirmation
- Examination of issues and countermeasures for connection with external systems
- Investigate ideas and countermeasures that were shown to be necessary in the proof of concept
In addition, as previously announced, the CBDC Forum will be established to solicit ideas and knowledge from private business operators involved in retail payments and deepen their consideration.
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The Bank of Japan said that whether to introduce CBDC will be decided through future public discussions.
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What are CBDCs
An abbreviation for “Central Bank Digital Currency”, it refers to a digitized currency issued by the central bank of each country or region. The big difference from crypto assets (virtual currency) is that CBDC is a digital legal currency.
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Assuming cooperation with DLT
In the result report of this time, there is an item called “peripheral functions for cooperation between intermediary institutions and external systems”. In that item, the Bank of Japan said, “The external systems to be linked may not only be based on existing technologies, but may also be based on new technologies such as distributed ledger technology (DLT). ‘ said. DLT generally includes blockchain.
The Bank of Japan said, “In overseas CBDC demonstration experiments, there are also cases of collaboration between CBDC systems and DLT platforms, with an awareness of so-called asset tokenization, in which assets are tokenized and distributed on a platform that utilizes DLT. There are many.”
Therefore, in the proof of concept of the Bank of Japan, when considering the exchange of assets on the CBDC and DLT platforms, the assets to be exchanged are once secured in each system, and if the securement is successful in both systems, the final exchange is performed. It is explained that it is assumed that processing interlocking with maintenance (escrow) is assumed.
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In addition, in the proof of concept of Phase 2, he said that limits on the holding amount, transaction amount, and number of transactions were also verified in order to ensure the stability of the financial system.
According to data from the American organization “Atlantic Council,” 18 countries and regions around the world are conducting CBDC pilot tests. The actual number launched is 11.
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