Digital currency experiment enters 2nd stage

Yomiuri Shimbun file photo
The Bank of Japan building

TOKYO (Jiji Press) — The Bank of Japan’s experiment with a central bank digital currency (CBDC) has entered its second stage, which focuses on restrictions on holdings and transactions.

In the first stage, completed in March, the BOJ checked issues related to the basic functions of a CBDC, including its issuance, withdrawal from financial institutions and transfers between them.

The second stage that started in April involves ways to prevent a shift of funds from bank deposits to a CBDC from threatening financial system stability.

Specifically, the BOJ is examining restrictions on the maximum amount of a CBDC that a person can hold and that can be transferred at one time. Issues related to holders of multiple CBDC accounts at different financial institutions will also be studied.

The BOJ plans to complete the second stage in March next year. It plans to conduct a pilot test involving the participation of consumers and businesses in the future.

CBDCs are expected to become a major means of payment for goods and services. The United States, Europe and China are examining them.

BOJ Gov. Haruhiko Kuroda has said that the central bank has no plans to issue a CBDC at the moment. BOJ Executive Director Shinichi Uchida last month said that the bank will consider what kind of design a CBDC would have if it is issued in the country.

The Japanese banking industry is paying close attention to CBDCs that are expected to affect financial and payment systems.

Makoto Takashima, chairman of the Japanese Bankers Association, said any CBDCs should be limited to roles that complement private-sector efforts to advance payment methods.

Tetsuya Inoue, a senior researcher at Nomura Research Institute Ltd. , said that issues, such as how to share costs of CBDC issuance and how to link with existing payment systems, need to be discussed.