Japan will prioritize simplicity in CBDC design, says central bank executive
The Bank of Japan is keen to ensure seamless integration of its central bank digital currency with the existing payment architecture.
While Japan’s CBDC plans are still in the research stage, Shinichi Uchida, an executive of the Bank of Japan (BOJ) has said simplicity will drive the central bank’s design thesis for the digital yen.
According to Reuters, Uchida made this known during a speech delivered on Friday calling for modalities to be put in place to ensure the CBDC co-exists with existing private payment channels.
For Uchida, vertical integration of the digital yen within the private sector payment matrix will require a simple CBDC design.
Part of this simple design could involve creating a framework for people to use both the CBDC and electronic payment services from one wallet enabling seamless switching between both channels.
According to Uchida, vertical integration will incentivize the private sector to adopt Japan’s CBDC leading to more valuable services.
As previously reported by Cointelegraph, the BOJ has begun preliminary proof of concept studies on the possibility of issuing a CBDC. The second phase of the digital yen studies will reportedly commence in Q2 2022.
Japan is one of many nations in the Asia Pacific financial theater examining the merits of floating a central bank digital currency, especially in the wake of China’s digital currency electronic payment project.
In March, the BOJ announced the creation of a Liaison and Coordination Committee that draws from public and private sector participants tasked with collaborating on the digital yen CBDC pilot.
Japan’s CBDC studies may also involve examining modalities for cross-border compatibility with other sovereign digital currencies, possibly as a counter to China’s digital yuan on the international stage.
Cooperation on CBDC matters across international lines is also becoming a significant focus point for several countries developing their national digital currencies.
Meanwhile, global finance bodies like the Bank for International Settlements continue to push for CBDCs to counter the proliferation of cryptocurrencies.