The Bank of Japan will proceed gradually with its exploration of the digital Yen, preferring Sweden’s approach to China’s rapid development of tests.
Developed and emerging nations have shown an increasing interest in central bank digital money in recent years (CBDC). The Bank of Japan has adopted a cautious approach to the digital Yen, claiming that it would follow the same evolutionary path as Sweden. BOJ said that the final decision on whether to issue CBDC is anticipated to be taken by 2026.
The BOJ views the framework of its CBDC as being inseparably intertwined with the broader settlement system; as such, the central bank feels that one of the important concerns during the experimental phase is ensuring compatibility with its financial infrastructure and other possible CBDCs.
According to a report, Kazushige Kamiyama, the chairman of the BOJ’s payment system section, said in an interview that Sweden’s phased and planned development of experimentation is more appropriate than China’s method.
China conducted a large-scale trial test of its digital currency during the Beijing Winter Olympics earlier this year, with the goal of accelerating the acceptance of the digital yuan.
Meanwhile, Sweden’s Riksbank has concentrated on a smaller-scale technological study to see if its CBDC might coexist with other digital payment providers in a settlement system. As a result, neither the Riksbank nor the BOJ has decided whether to create digital currencies.
Kamiyama stated that developing countries, in comparison to industrialized economies, are more likely to introduce electronic money as a result of their payment network’s relative weakness. As the second phase of research on digital Yen is about to begin, Kamiyama said that the next step will be a small-scale pilot test.
CBDC is lauded by the US Treasury Secretary
US Treasury Secretary Janet Yellen recently said in a speech devoted entirely to cryptocurrencies that a CBDC and other stablecoins might acquire more acceptance as a form of payment than Bitcoin. She hinted that the Federal Reserve’s digital currency might eventually supplant Bitcoin as a medium of trade owing to Bitcoin’s price volatility.
Meanwhile, The Depository Trust & Clearing Corporation (DTCC), the primary US securities processor, announced the initiation of “Project Lithium,” which would examine how real-time transactions using cash-like tokens may be cleared and settled.
This is a significant indication that the US is actively exploring the benefits and drawbacks of CBDC, laying the groundwork for future relevant tests and studies.
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