The Bank of Japan is keen aiming to guarantee seamless integration of its central bank digital currency (CBDC) with the current payment architecture. While Japan’s CBDC plans are now in the research stage, one executive of the Bank of Japan (BOJ), Shinichi Uchida, has insisted that simplicity will help in pushing the central bank’s design thesis for the digital yen.
Based on a report by Reuters, Uchida made the known during a speech that was delivered on October 15 calling for modalities to be set in place to guarantee that the central bank’s digital currency co-exists with the already-existing private payment channels.
For Uchida, the vertical integration of the digital yen within the country’s private sector payment matrix will need a simple CBDC infrastructure design. A segment of the proposed simple design may feature the creation of an infrastructure for people to use both the CBDC and electronic payment services from a single wallet enabling smooth switching between both of the channels.
Based on a statement by Uchida, vertical integration will manage to incentivize the private industry to adopt Japan’s CBDC leading to many other valuable services. According to previous reports, the Bank of Japan has started its preliminary proof of concept studies on the probability of issuing a CBDC. The second phase of the digital yen studies will allegedly start in the second quarter of 2022.
Japan is among the many countries in the Asia Pacific financial theater that is examining the merits of floating a CBDC, mostly in the wake of China’s digital currency eYuan payment project.
In March 2021, the Bank of Japan introduced plans of creating a Liaison and Coordination Committee that is designed on the back of private and public industry participants who were required to collaborate on the digital yen CBDC pilot.
Japan’s digital yen studies might also involve the examination of modalities for cross-border compatibility with other sovereign digital currencies, maybe as a counter to China’s digital yuan on the international stage.
Cooperation on central bank digital currency matters on the international front is also becoming a considerable focus point for many nations that are currently developing their digital currencies.
In the meantime, global finance bodies like the Bank for International Settlements (BIS) continue to push for CBDCs to counter the proliferation of cryptos.