Japan calls for CBDC design to ‘co-exist’ with private sector

The BOJ has no immediate plans to release a CBDC

Private sector could develop services that allow use of both Japan’s CBDC and private payment - Photo: Shutterstock

The Bank of Japan (BOJ) has said a central bank digital currency (CBDC) issued by the financial institution should have a simple design in order to “coexist” with private sector businesses.

Shinichi Uchida, executive director at the BOJ made these comments in a speech on 15 October, Reuters reported.

Japan’s CBDC or digital yen design the director said should be easy for private firms to use to develop financial and payment services for customers.

Uchida said: “To achieve vertical coexistence, a relatively simple CBDC design is desirable for the private sector to use it as an ingredient" to develop various services.

The director believes private entities could develop services that allow customers to use both Japan’s CBDC and private payment means with a single wallet.

BOJ will move to second stage of CBDC experimenting in April 2022

The BOJ is currently in the first stage of experimentation with a CBDC but plans to move to its second in April 2022. The second stage will focus on testing key features such as if a limit should be set on the amount of CBDCs each business can hold.

The BOJ said it currently has no immediate plans to issue a CBDC, but it has set up a regular panel to exchange views with the private sector. This is in order to ensure any digital currency rolled out, does not interfere with private sector or innovation.  

Hong Kong regulator considers retail-focused central bank digital currency

At the beginning of October, the Hong Kong Monetary Authority (HKMA) published a white paper titled ‘e-HKD: A technical perspective’ which investigated the idea of a retail focused CBDC, the digital Hong Kong dollar (e-HKD).

In June this year, the HKMA announced project e-HKD, a retail or general-purpose CBDC (rCBDC) project that aimed to study the feasibility of the e-HKD. The project involves two parts, one a technology experimentation study, the other a comprehensive study of other legal and policy issues.

The white paper released by the HKMA makes up part of the technology experiment. It explores the “potential architectures and design options that could be applied to the construction of the infrastructure for distributing e-HKD and reports the initial thoughts and findings.”

It also aims to explore the technology solutions “that address the problems of cross-ledger synchronisation, over-issuance prevention and privacy-preserving transaction traceability”.

According to Ripple, the provider of blockchain and cryptocurrency solutions, over 80% of central banks are exploring the idea of some form of sovereign-backed cryptos, including CBDCs.

Further reading: HSBC chief executive backs central bank digital currencies

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