Japan to Launch Central Bank Digital Currency Pilot in April 2023

In April of 2023, Japan intends to launch a pilot program for a central bank digital currency (CBDC), even if the country does not permit the use of international stablecoins like Tether (USDT). It intends to include commercial companies and put a model of a CBDC ecosystem through its paces.

The Bank of Japan (BoJ) published Shinichi Uchida's opening remarks from a CBDC committee meeting on February 17th. Uchida is the executive director of the BoJ. In it, Uchida announces that the Bank has chosen to begin a pilot program for "digital yen" in April after concluding its proof-of-concept testing, which began in 2021. This decision was made after the Bank completed its testing in 2021.

During the pilot test, the investigation into the technological viability of "digital yen" will continue, and the experiment will be expanded to include the modeling of a CBDC ecosystem with the involvement of commercial businesses. According to the official, for the course of the pilot project, there will be no real retail transactions, simply simulations of such transactions.

In his address, Uchida focuses on the design of the future CBDC as well as the need of consulting with the business sector about alternative data models, architectures for offline payments, and other essential components of the system. In order to facilitate discussions of this kind, the CBDC forum will be established.

Since the local media first announced the BoJ's plan in November 2022, everyone was quite excited to hear the news regarding the CBDC pilot project. The Bank of Japan is reportedly going to work with at least three Japanese megabanks as well as regional banks.

In the meanwhile, the authorities in Japan are contemplating whether or not to repeal the restriction on foreign stablecoins that was passed into law in 2022. The Financial Services Agency of Japan estimates that the revisions will be ratified by the end of June 2023 at the latest. Despite the fact that they won't automatically allow any foreign stablecoin to enter the market, they will give the all clear to those currencies that are able to successfully pass individual tests.