Bank of Japan kicks off CBDC pilot project, seeking public and business input to shape future of digital currency
The Bank of Japan (BOJ) has published the findings of the second phase of its proof-of-concept (POC) experiment on the central bank digital currency (CBDC). The report confirms the successful launch of the CBDC pilot project in April, adhering to the predetermined timeline.
The second phase of the proof of concept (POC), spanning from April 2022 to March 2023, focused on exploring additional functionalities to complement the core ledger functions assessed during the initial year-long experiment.
According to the Bank of Japan report, the second phase primarily examined the technology required to establish upper limits on CBDC holdings. These limits are considered essential safeguards to ensure the financial system’s stability in the event of a sudden transition from bank accounts to the CBDC.
The study encompassed scenarios involving users with multiple accounts across various intermediaries. Furthermore, it assessed the convenience of users in initiating and scheduling payments.
On the technical front, the experiment involved testing the database language and ledger design and trialing a flexible-value token model. An orchestration system was implemented to expedite the processing of multiple transactions within the same account.
The experiment was conducted under the assumption of 100,000 users with five intermediaries, evaluating transaction loads of 500 and 3,000 per second. The report also addressed scalability considerations and briefly touched upon privacy, which remained a focal point throughout the experiment. The discussions regarding offline payments primarily centered around fraud prevention and privacy preservation.
As confirmed by the report, the POCs achieved the desired outcomes, leading the BOJ to proceed with its scheduled CBDC pilot project. This phase will examine the end-to-end process flow and establish further connections with external systems. The report emphasized that the decision to issue a CBDC should result from discussions with the Japanese residents.
The BOJ plans to establish a CBDC Forum to gain insights from private businesses. The final determination regarding the issuance of a CBDC is slated to be made by 2026, as announced by the Bank of Japan.