The Bank of Japan (BOJ) has completed the second stage of its CBDC experimentation and is now moving forward with its pilot project.
The Bank of Japan (BOJ) has successfully wrapped up the second phase of its study into the possibilities of a central bank digital currency (CBDC), according to a recently released report. This year-long project, spanning from April 2022 to March 2023, enhanced and built upon the foundational ledger functions explored in the first phase.
The report indicates that this second phase focused on technologies to establish maximum limits on CBDC holdings, which the BOJ views as a crucial step towards ensuring financial stability.
This is in anticipation of any abrupt transitions from conventional banking to CBDC usage. This consideration extends to scenarios where an individual user maintains multiple accounts via different intermediaries.
Additionally, user-friendly procedures for initiating and scheduling payments were evaluated. Technological advancements in database languages and ledger designs were also explored, including trials on an innovative flexible-value token model.
To accommodate multiple transactions from a single account more efficiently, an orchestration system was introduced.
A model consisting of 100,000 hypothetical users and five intermediaries was utilized in the experiment, which tested load capacities from 500 to 3,000 transactions per second.
While not exhaustively addressed, privacy concerns were inherently included, and offline payments were evaluated, especially in relation to fraud prevention and privacy upkeep.
The POCs achieved their objectives, according to the BOJ, paving the way for the timely launch of the CBDC pilot project, which will further study process flows and integration with external systems. Intriguingly, the report emphasizes that the Japanese public will be instrumental in the decision-making process regarding the issuance of a CBDC.
To facilitate input from the private sector, a CBDC Forum will be established. The BOJ aims to reach a definitive decision about the launch of a CBDC by 2026.