Cryptocurrencies

Central Bank of Japan to release working digital currency model in 2021 – Cryptocurrencies

After working with the BIS (Bank for International Settlements) to write a report on the fundamentals of CBDCs, the Bank of Japan is taking the plunge. It has just published a document describing its specific approach to CBDCs in the Japanese context. A roadmap to lead to the launch of digital currency in the territory has been drawn up. The bank has placed particular emphasis on the need for offline availability of this CDBC so as not to paralyze the local economy. More explanations below.


Development of a test environment from 2021

In its report, the Bank of Japan plans to launch major maneuvers to test the use of a CDBC as early as next year. Several test phases will be launched across the country. in order to assess the reliability of its basic functions, in particular a payment tool. It will therefore be a question of develop an environment for money through these first tests. Like the report written in partnership with the BRI, the document from the Japanese bank also discusses the principles and characteristics of its CBDC.

One of the essential characteristics thus addressed concerns the resilience of the digital currency in the face of an infrastructure disrupted by major forces. The report states that: “ Offline use during system and network failures as well as power failure is also important for Japan, given the frequency of natural disasters “. The rather particular geographical situation of the country in fact a recurring target of several natural disasters. These could indeed disrupt or even paralyze the economy in a context of CDBC use if nothing is done to counter this upstream.

Develop new technology or use existing ones

The experience of bitcoin and cryptocurrencies in general could be a benchmark for the Bank of Japan thanks to their mode of operation in the event of a network failure. It would also be appropriate to evoke the use of Blockstream’s satellite network that supports bitcoin transactions. To this is also added the development of mesh networks based on long-wave radio transmitters. The document did not, however, provide more details on which means the new CBDC would base itself on to guard against such blackouts. So it could be that the Bank of Japan is working on develop itself a new technology for these extreme cases.

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Far from going it alone after its collaboration with the BIS and six other central banks, the Bank of Japan intends through its initiative adapted to the CBDC to the national context. The BIS report already stated that central banks were free to take initiative regarding the timelines and technical details of launching their digital currencies.

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