Japan's CBDC second phase experiment progressing smoothly, testing end-to-end processes starting in April

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Japan Has Implemented CBDC Pilot Program Since April

The Bank of Japan (BOJ) has announced the results of the second phase of the Proof of Concept (PoC) for the central bank digital currency (CBDC) concept verification and confirmed that the CBDC pilot program has been implemented according to plan since April.

The second phase of the PoC experiment started in April last year and continued until March this year. According to the report by the Bank of Japan, the second phase tested the technology for implementing a cap on CBDC holdings, described as a "safeguard measure to ensure the stability of the financial system" to address situations where users have multiple accounts at multiple intermediaries.

In the second phase, 100,000 users and five intermediaries were set up for stress testing with 500 to 3,000 transactions per second, while issues such as scalability and privacy protection have been under discussion.

The BOJ has launched a trial plan scheduled for April 2023 and is conducting related tests. In the trial plan, an end-to-end process will be tested, measures and potential challenges in connecting with external systems will be explored, and considerations and solutions needed in the PoC will be studied. Additionally, a CBDC forum will be established to arrange CBDC institutionally in an appropriate manner, drawing on ideas and insights from private enterprises related to retail payments to deepen the research.

Review of Japan's CBDC Planning

Global Challenge: Uncertainty on the Need for CBDC

While the report states that the experiment has successfully achieved the expected results, the central bank will continue with the CBDC pilot program, focusing on peer-to-peer transaction processes and further interaction with external systems.

Regarding issuance, the report mentions that a CBDC forum will be established to obtain opinions from private enterprises, and discussions should also involve the Japanese public.

The Bank of Japan will make a final decision on the issuance of CBDC by 2026.