The Bank of Japan (BoJ), the country’s central bank, has recently announced that it will begin experimenting with a central bank digital currency (DCBC) to assess its feasibility from a technical point of view.
In a report, dubbed “Technical Hurdles for CBDC”, the bank stated that it would check the feasibility of CBDC from technical perspective. The BoJ said it will partner with other central banks and relevant institutions and consider introducing a CBDC.
In the report, the BoJ stated that universal access and resilience are the 2 major technical barriers to the issuance of CBDC. Universal access refers to the provision of financial services to everyone, including those without a smartphone.
According to a previous report by Nikkei, as of 2018, only 65% of Japanese people have smartphones. The BoJ believes that developing and making the CBDC available to a variety of users is very important.
Resilience on the other hand refers to making the services available to everyone, even when electric power is down. The BoJ stressed the importance of accessibility in all kinds of environment, even in emergency situation such as earthquake.
Meanwhile, the BoJ is still considering whether to use blockchain for its CBDC or not. The BoJ noted that both centralized and decentralized types have their advantages and disadvantages.
According to the bank, centralized type is the better option for massive transactions for retail use cases in advanced countries. However, the entire system can suddenly go down if there is a single point of failure.
On the other hand, the BoJ considers the decentralized type in cases where the amount of transaction is limited and resilience and future possibility are prioritized. Yet, the option also requires a longer amount of time to transact, since blockchain networks require consensus among multiple validators.
It was reported earlier this year that 6 major central banks, including Japan, had planned to collaborate on researching issuing digital currencies. China has already begun testing its own CBDC, but it remains to be seen if Japan can catch up with them.
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