The Bank of Japan will explore the digital Yen cautiously, preferring Sweden’s approach over China’s quick expansion of experiments.
Over the past years, developed and developing countries have shown a growing interest in central bank digital currency (CBDC). The Bank of Japan has recently announced a cautious approach to the digital Yen, stating that its developmental trajectory will follow similar steps as Sweden did. The final decision on whether to issue CBDC is likely to be made by 2026, BOJ revealed.
No Large-scale Pilot Tests Like China
BOJ considers the framework of its CBDC closely tied to the overall settlement system; thus, during its experimental phases, the central bank believes one of the critical issues is to ensure its compatibility with its financial infrastructure and other potential CBDCs.
Kazushige Kamiyama, the head of the BOJ payment system department, said in an interview that Sweden’s staged and planned expansion of experiments is more suitable than China’s approach, as reported by Bloomberg.
China, earlier this year, began a large-scale pilot test of its digital currency at the Beijing Winter Olympics, aiming to push the broader adoption of the digital yuan.
Sweden’s Riksbank, meanwhile, has focused on smaller-scale technical research aimed to examine if its CBDC could fit into a settlement system with other digital payment providers. As such, neither Riksbank nor BOJ has finalized a decision on whether to issue digital currencies.
Kamiyama added that emerging economies, compared to developed nations, are more prone to launch electronic money due to the relative weakness in their payment network. As the second phase of studies on digital Yen is ready to be launched this month, Kamiyama revealed that the next stage would be a small-scale pilot test.
The US Treasury Secretary Praises CBDC
In a recent speech solely dedicated to cryptocurrencies, US Treasury Secretary Janet Yellen noted that a CBDC and other stablecoins could achieve further adoption as a means of payment than Bitcoin. She implied that the Fed-issued digital currency could outcompete Bitcoin as means of exchange due to BTC’s price instability.
Meanwhile, The Depository Trust & Clearing Corporation (DTCC), the main US securities processor, announced the launch of “Project Lithium” for examining how real-time transactions via cash-like tokens can pass through in the clearing and settlement process.
This is a strong indicator that the US is actively researching the pros and cons of CBDC, paving the foundation for relevant experiments and studies in the near future.