The Japanese Central Bank’s recent plans of experimenting with the issuance of digital Yen has started to take shape as more than 30 major Japanese firms have come together to test the use cases for a common, private digital currency starting next year. The 30 member group consists of Japan’s three largest banks along with brokerage firms, telecommunication firms, utilities, and retailers, reported Reuters.
Japan is considered to be a highly technologically progressive country and was among the first ones to regulate cryptocurrency trading. In fact, the island country also helped many G-20 nations in formulating their respective regulatory policies around digital assets. Despite being one of the largest crypto trading markets, Japan is still a cash-centered society and known to be “one of the world’s most cash-loving countries.”
Even today during the ongoing COVID-19 pandemic the cashless payments make up only 20% of the total settlement in Japan, while China marks the highest percentage of cashless payment at 70%.
Hiromi Yamaoka, a former BOJ executive and the chairman of the group believes creating a common private digital currency would be a daunting task given the love for cash in the country. He said,
“Japan has many digital platforms, none of which are big enough to beat cash payments. We don’t want to create another silo-type platform. What we want to do is to create a framework that can make various platforms mutually compatible,”
Private Banks to Become the Distributor of Digital Yen?
The emergence of cryptocurrency as an alternative financial ecosystem has made every country not just regulate the use of crypto but also look for ways to create a national digital payment system that mimics the qualities of digital assets. While digital payments have become a norm almost everywhere, it is quite disintegrated as multiple banks and financial service providers have different means of making digital payments. Thus Bank of Japan is forcing more on creating a digital payment system that is compatible with the existing ones rather than a completely new one.
At present, private banks would be responsible for the distribution of digital yen during the testing phase, however, Yamaoka did not rule out the possibility of other business entities joining the issuance program.
After China’s rapid progress towards its national digital payment system called DCEP, most of the other nations have started work towards issuance of their own respective CBDC, especially many European countries as well as the United States. However, it is important to note that China started working towards its national digital currency almost 6 years ago and is currently running several pilot programs for the digital yuan for almost a year now and is slated for an official launch in near future.