The Bank of Japan will launch a pilot program for its central bank digital currency project in spring 2023 for three major Japanese banks.
The launch of the pilot will be in line with the bank’s one-year CBDC experiment set to end in April 2023.
Japan CBDC Could Arrive in 2026
The two-year pilot is aimed at detecting any issues with deposits and withdrawals from bank accounts. It will also check whether the infrastructure is operational during natural calamities and without internet connection. The bank will decide whether to make the CBDC live in 2026.
The governor of the Bank of Japan stated in May 2022 that, while the Bank of Japan has not yet decided whether to launch a retail CBDC, the currency will help secure a secure and seamless infrastructure in the country.
Japan joins Asian-led race for CBDC
Several other major global economies are in various stages of CBDC testing. Others such as Nigeria and Jamaica have been using one for some time.
Broadly speaking, Asian countries appear to be in more advanced stages of CBDC-related projects.
On November 1, 2022, G-20 member India launched a wholesale CBDC pilot to ease interbank settlement, with plans for retail currency. The Wholesale CBDC focuses on reducing the settlement risk of banks.
The People’s Bank of China plans to expand the rollout of digital wallets for its e-CNY digital currency to several developed provinces by the end of 2022. It has already recorded $13.9 billion in e-CNY digital transactions.
On the other hand, the US, the Eurozone and the UK have something to do.
The US Federal Reserve is running a 12-week CBDC proof-of-concept program in partnership with several large financial companies including Mastercard, HSBC, Citigroup and Wells Fargo. Commercial banks will issue fungible token dollars settled through a simulated central bank reserve on a shared distributed ledger.
Interestingly, the banking group will publicize the results of the trial but is under no obligation to participate in future phases of the project.
The Bank of England has set up a task force to oversee use cases and operations for a CBDC, but has yet to formally decide on the way forward. It was originally promoted by former Chancellor Rishi Sunak, who is now the Prime Minister of the UK
The European Central Bank said it aims to launch a CBDC by the middle of the decade.
A CBDC Could Educate People Before It Expires
While crypto enthusiasts warn that a CBDC could be a tool to consolidate the power of authoritarian regimes, a potential upside is that it could educate people on how to hold and spend digital currencies, in and out of digital wallets. Could be a tool to do that.
Once familiar with digital transactions, CBDC users can easily choose to use cryptocurrencies alongside CBDCs or even scrap CBDCs altogether, as Nigerian citizens have done.
In Nigeria, a year after the introduction of e-naira adoption had reached only 0.5% of its population, with citizens preferring private cryptocurrencies. The population’s general mistrust of the ruling elite and a degree of disillusionment were hindering adoption.
As of November 2, 2022, Nigeria was ranked #11 globally for bitcoin adoption.
In other Japan-related news, the national football team defeat Germany 2-1 at the 2022 FIFA World Cup in Qatar on November 23, 2022.
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