The national bank of Japan stated on Thursday about exploring the option of a digital national currency in cooperation with foreign central banks and financial techs. The Bank of Japan declared on experimenting with Central Bank digital currency (CBDC) to check it’s feasibility from a technical perspective.
As per the report, Technical Hurdles for CDBC, this approach is to digitize cash, although, it is still to see if Japan can match up with China which has already begun testing its own CDBC. This news comes behind the European currencies trial of the CDBC on Sweden, France and Switzerland alongside Britain and Canada which are also experimenting on the initiation.
In accordance with the report, the BoJ is looking into overcome two major hurdles: universal access and resilence. The former being the maximum accessibility, but, based upon the Statista Research Development, only 66% of Japanese people use smartphones which is very less impactful. The other being the service availability of digital currency when electric power is not available. For example- the accessibility for use under circumstances like earthquake or others.
Digital Yen and Blockchain
The BoJ is analyzing the scenarios if blockchain is to be used for the CDBC. Distributed ledger technology based DBDCs will avoid single point of failure and show resilience but may require a longer amount of period on transact since blockchain networks require a general agreement among multiple validators.
In April, China experimented the pilot version of digital yuan on four cities- Shenzhen, Chengdu, Suzhou and Xiongan.