In April 2023, the Bank of Japan intends to start a pilot project for central bank digital currency- CBDT post a successful proof of concept- PoC. Uchida Shinichi, executive director of central bank in Japan made this announcement at the CBDC Liaison and Coordination Committee’s fifth meeting.
The pilot will examine the technical viability of a CBDC not previously covered by the PoC, as well as the technological and operational skills and insights of private enterprises.
The Bank of Japan currently only plans to permit simulated transactions during the pilot, not real ones, between retailers and customers. According to Shinichi, a functioning CBDC will require the interconnection of multiple systems, such as central banks and intermediaries, and the pilot will thus attempt to establish a series of experiments that test the end-to-end process, integrating the CBDC with external systems.
Additionally, it is believed that by working with and conversing with the private sector, sponsored by a recently established CBDC Forum that includes retail payment and paytech firms, the pilot would lead to improvements in design.
There are several things to take into account, such as potential difficulties in integrating the experimental system with external ones, different data models and architectures for offline payments, the best way to design the CBDC system to provide value-added services, and difficulties, technologies, or features of user touchpoints.
In terms of how they will proceed with the pilot project, a trial is going to commence with narrower objectives, progressively broadening the scope of the studies in a methodical and planned manner, Shinichi explains. In a culture that still uses cash, Shinichi believes that exploring CBDC in stages will ensure that the modifications required for CBDC to be widely adopted are made. When a perfect arrangement is introduced to the world, a method of payment does not become the standard.
The pilot programme is the result of a white paper that was released in October 2020, as well as the POCs’ first and second phases, which took place in April 2020 and April 2021, respectively.