Japan will prioritize simplicity in its development of a central bank digital currency. A senior official at the Bank of Japan (BOJ) has stated that this will ensure the digital yen is interoperable with other local payment systems.
The BOJ has been stepping up its efforts in developing the CBDC at a time when other Asian giants are taking huge leaps in this field. China is the leader in the region with its digital yuan, with other nations like Thailand and Hong Kong also quickly advancing, both at a national and regional level.
As Reuters reports, one BOJ top executive believes that simplicity will be key in positioning the digital yen for quick uptake. The country, which is well advanced in many tech sectors, still lags behind its peers in digital payments. Japanese customers are notoriously fond of cash payments, posing a potential challenge to the adoption of the digital yen.
With this in mind, Shinichi Uchida, executive director at the BOJ, believes that the CBDC has to be interoperable with local payment systems if it’s to stand a chance. For interoperability, simplicity in design will be key.
“To achieve vertical coexistence, a relatively simple central bank digital currency (CBDC) design is desirable for the private sector to use it as an ingredient to develop various services,” he stated.
Such a design would allow private entities to develop services that enable customers to use the digital yen alongside other private payment means within a single wallet with minimal interruptions, the bank official said in his speech.
At the same event, the BOJ revealed that it will move into the second phase of its CBDC experiment in April 2022. In this phase, it will focus on testing some key features, including whether to set a limit on the maximum amount of digital yen that any one entity can hold.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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