The Bank of Japan (BoJ) recently engaged in its inaugural official dialogue with the Japanese government regarding the development of a central bank digital currency (CBDC). As reported by NHK, a local TV channel, on January 26, the government and the BoJ have agreed to address legal challenges associated with the issuance of a digital yen by spring 2024.
While the report indicates progress, neither the BoJ nor the government has formally confirmed the launch of the digital yen. Any decision regarding its introduction will only be made after a comprehensive national discussion, expected not earlier than 2026.
In December 2023, the BoJ received a recommendation from an expert panel within the Ministry of Finance, urging the issuance of a digital yen promptly. The panel emphasized that the digital currency should coexist with traditional cash and advised the BoJ to limit the storage of personal data.
The BoJ concluded the second phase of its CBDC testing in May 2023. This year-long trial involved 100,000 participants and five intermediaries, testing transaction loads of 500 and 3,000 per second. Following the successful completion of this phase, the BoJ is moving forward with a pilot project to examine the complete process flow and integration with external systems.
Despite Japan’s reputation as a predominantly cash-based society, it has shown a favorable attitude towards CBDCs. This is in contrast to the United States, where some lawmakers and presidential candidates are actively opposing CBDCs. Notably, the BoJ’s support for CBDCs does not translate into an anti-crypto policy. Starting April 2024, local businesses in Japan might benefit from tax exemptions on unrealized gains from cryptocurrency holdings.
Asia is generally more receptive to CBDCs. China is progressively rolling out its digital yuan, and other countries like Hong Kong, Singapore, Malaysia, India, and South Korea are exploring CBDCs.
Adding to the trend, the National Bank of Cambodia announced in early January its intention to launch a CBDC by the end of 2024. The bank stated that the process for introducing ‘Lanka Pay’ and ‘Central Bank Digital Currencies’ has already commenced.
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