Another significant leap has been taken with Japan CBDC pilot program that was recently launched in April 2023.
The Bank of Japan has recently unveiled the findings of its comprehensive report on central bank digital currencies (CBDCs).
With a commitment to testing the end-to-end process flow and addressing potential challenges, the program aims to gain valuable insights and develop necessary solutions.
Exploring the Pilot Program
The bank expressed its commitment to the pilot program, which aims to test the end-to-end process flow.
Additionally, the program will delve into exploring measures and potential challenges regarding the connection with external systems. The insights gained from the proof of concept (PoC) will be examined for considerations and necessary solutions.
To ensure thorough evaluation and assessment, the Bank of Japan initiated the first phase of the proof of concept in April 2021. Subsequently, the second phase commenced a year later. This was with a focus on the evaluation of new technologies and accounts offered by multiple intermediaries.
Global Trends: CBDC Exploration and Pilots
The trend of central bank digital currencies is gaining momentum globally, with an increasing number of countries actively exploring the possibility of implementing CBDCs. According to the Atlantic Council, which tracks CBDC initiatives in 120 countries, eleven countries, including the Bahamas and Nigeria, have already launched their CBDCs.
Furthermore, the Atlantic Council reports that 18 countries, including Japan, India, and China, are currently in the pilot stages of their CBDC development.
Excitingly, in 2023, more than 20 countries are expected to take significant steps towards piloting their CBDC projects. Australia, Thailand, India, South Korea, and Russia have expressed their intent to either continue or initiate pilot testing this year. Additionally, the European Central Bank (ECB) is likely to commence its own pilot program in the near future.
Mixed Reactions in the US: Lawmakers Weigh In
Within the United States, the future of a CBDC has sparked varied responses among lawmakers. A bill called the Power of the Mint Act was recently introduced by Republican Rep. French Hill of Arkansas and Democratic Rep. Jake Auchincloss of Massachusetts. The bill aims to impede the Federal Reserve from issuing a CBDC.
Advocates of CBDCs argue that they can enhance financial services for citizens. However, critics assert that CBDCs may encroach upon individual privacy. In alignment with these concerns, Republican Sen. Ted Cruz and Rep. Tom Emmer have introduced bills aimed at blocking the Federal Reserve from directly issuing a CBDC to individuals.
It is noteworthy that the Federal Reserve has not made a final decision regarding the issuance of a CBDC. Fed Chair Jerome Powell has stated that any such decision would require congressional approval.