In a press release dated February 16th, the Bank of Japan stated that it is going to launch a new pilot for its Central Bank Digital Currency (CBDC) initiative, the digital yen, in April. The purpose of a new CBDC pilot in Japan is to evaluate the project’s technological viability and linkage to current financial networks.
CBDC is a digital representation of a central bank-backed fiat currency issued by a government, such as the US dollar or yen. The fact that CBDCs operate on a private blockchain under the jurisdiction of a government sets them apart from other digital assets like Bitcoin or Ethereum.
This could be a Defining Test for the Digital Yen
The bank does not anticipate any real transactions between involved users. The notification states that only “mock transactions” would be resolved throughout the test. The goal is to evaluate the CBDC‘s “technological feasibility” and gain greater insight into how private businesses are utilizing cryptocurrencies.
The proper data models and architectural framework will be chosen for this trial in order to support offline payments, and it will also study the technological difficulties of connecting the experimental CBDC network with the current financial networks. The Japanese Central Bank has released several working papers, experiments, and experiences before its most recent declaration.
Besides Japan, Other Major Economies are Also Forging Through
Several significant developed economies are also forging through with their CBDC ambitions, not only Japan. A fresh consultation on the adoption of a “Britcoin,” which is anticipated to be fully operational by the late 2020s, was just published by the Bank of England and the UK Treasury. Since at least April 2021, when a formal task team was established, the UK has likewise been striving to develop a Digital Libra.
Australia also declared its determination to proceed with its plans for a CBDC pilot, which would be known as the eAud, in September. Research conducted by Bank of America (BoA) indicates that 114 central banks, or 58% of all nations, are now investigating CBDCs.
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