A report in the major newspaper Nikkei on November 23 said that Japan’s central bank has started making plans to start a trial of a central bank digital currency (CBDC) with the country’s top financial firms.
The same report mentioned that the Bank of Japan is partnering with three megabanks as well as regional banks in the Asian country, and they want to test out a digital version of the yen in the next year. If all goes according to plan, the Bank of Japan (BOJ) may go ahead and produce a CBDC in 2026.
The BOJ’s experiment will investigate the feasibility of using a digital yen for deposits and withdrawals. A central bank will support the digital form of a state’s fiat currency, such as the dollar or the euro, and this kind of money is known as a CBDC. CBDCs are not the same as cryptocurrencies like Bitcoin, Ethereum, and Dogecoin, even though they are also digital assets.
This is because Bitcoin and other cryptocurrencies are not controlled by a single group. Instead, each cryptocurrency has a network of validators that keeps track of transactions and checks them. CBDCs, on the other hand, are controlled by a single authority, like the government or the central bank.
Research on CBDCs is still in its early phases in several nations throughout the globe, which are at various stages of the process. Some Chinese residents are already able to spend their digital yuan, putting China light years ahead of the competition.
Meanwhile, the Bahamas established its own CBDC in 2020. And just the week before, prominent financial institutions in the United States announced that they would be collaborating with the Federal Reserve to develop a platform for digital money. Privacy groups, on the other hand, have expressed their fear that CBDCs would make it easier for the state to monitor the spending of its inhabitants.
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