Japan’s central bank has started trials of a new digital currency in an effort to experiment with how it might be used, the Bank of Japan announced on Monday. The announcement comes after the Chinese government revealed it was doing something very similar with a digital yuan in early March.
“The Bank of Japan has been undertaking preparations to begin experiments on Central Bank Digital Currency (CBDC) in early fiscal year 2021, to test the technical feasibility of the core functions and features required for CBDC,” the Bank of Japan said in a statement published online. “As necessary preparations are now complete, Proof of Concept (PoC) Phase 1 begins today.”
The announcement confirms rumours that have been swirling since late 2020 about Japan’s potential creation of a digital yen. But there’s no guarantee that Japan will ever make the digital currency available to the public. Everything is very much experimental right now, according to the Bank of Japan.
“In PoC Phase 1, the Bank plans to develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption,” the Bank of Japan statement continued. “This phase will be carried out through March 2022, for a duration of one year.”
As the Register points out, virtually every large central bank in the world is experimenting or rumoured to be experimenting with digital currencies to ensure they’re ready whenever the time may come to issue one. And as cryptocurrencies like bitcoin and ether become more mainstream through services like PayPal, that time could be sooner rather than later.
In the U.S., Treasury Secretary Janet Yellen has said she supports financing research into a digital dollar, though she’s signalled the kind of conservative thinking you’d expect from a top government official. At least the kind of thinking in a normal (read: post-Trump) government.
“There’s a lot to consider here, but it’s absolutely worth looking at,” Yellen said back in February.