Date: 29 April, 2024
The Bank of Japan (BoJ) recently unveiled progress in its central bank digital currency (CBDC) endeavors with the release of an interim report. In a move echoing the Bank of England’s Project Rosalind, BoJ launched a CBDC API Sandbox this month, expanding its focus beyond previous proofs of concept (PoCs). These PoCs, including the most recent one, concluded a year ago, have paved the way for broader experimentation encompassing end-to-end scenarios involving intermediaries.
The latest phase of work, distinct from earlier efforts, delves into interoperability with external systems and explores additional functionalities crucial for CBDC implementation. Notably, industry engagement has intensified through five dedicated working groups, signaling a collaborative approach to CBDC development.
Among the explored functionalities are enhanced privacy measures, drawing inspiration from the digital euro model to segregate personal and payment data. However, discussions also broach the possibility of data monetization with user consent, suggesting an external data distribution mechanism separate from the central bank and intermediaries.
Scalability emerges as a paramount concern, with the envisioned CBDC platform expected to handle tens of thousands of transactions per second routinely and surpassing 100,000 transactions per second during peak demand periods.
The CBDC working groups, spanning topics from system integration to user experience, reflect a comprehensive exploration of CBDC ecosystem requirements. Additionally, a planned sixth group will delve into the coexistence dynamics between CBDC and existing payment methods, including electronic money.
While BoJ has yet to commit to launching a CBDC, hurdles such as low consumer awareness in Japan present challenges. Nonetheless, BoJ’s involvement in cross-border payment initiatives like Project Agora and the imminent launch of Japan’s first tokenized deposit solution, DCJPY, underscore the nation’s strides toward embracing digital financial innovations.
Key Points:
- BoJ released an interim report on CBDC progress, launching a CBDC API Sandbox akin to the Bank of England’s Project Rosalind.
- Previous PoCs laid the groundwork for broader experimentation involving end-to-end scenarios with intermediaries.
- Focus now includes interoperability with external systems and exploring additional CBDC functionalities.
- Industry engagement intensified through five working groups, emphasizing collaboration.
- Explored functionalities include enhanced privacy measures and potential data monetization with user consent.
- Scalability is a key concern, aiming for processing tens of thousands of transactions per second routinely and over 100,000 during peak times.
- CBDC working groups cover system integration, user experience, and coexistence with existing payment methods.
- BoJ’s participation in cross-border payment initiatives like Project Agora and the upcoming tokenized deposit solution DCJPY highlights Japan’s move towards digital financial innovations.
Reference
https://www.ledgerinsights.com/digital-yen-bank-of-japan-cbdc-api-sandbox/