The Bank of Japan (BOJ) plans to launch a digital yen pilot project (CBDC), starting after the successful completion of the second phase of its proof-of-concept (PoC).
The BOJ published the results of the second phase of the digital yen proof-of-concept, which began in April 2022 and ended in April 2023. During the research, the BOJ representatives studied the extended functionality of the decentralized ledger.
In particular, the developers experimented with the database language and ledger design and put a flexible-value token model into practice. An orchestration system was also tested to quickly process multiple transactions initiated by the owner of a single account.
Moreover, a technology for introducing upper limits for CBDCs was tested. It’s described in the document as “safeguards ensuring the stability of the financial system.” This mechanism should stabilize the economy in case of a sudden mass outflow of liquidity from bank accounts and increased demand for the digital yen.
The researchers also studied the usability of existing software solutions for payment transactions. A total of 100,000 users and five financial intermediary companies took part in the experiments. The network load ranged from 500 and 3,000 transactions per second and allowed for further scalability.
Privacy issues, fraud prevention, and the ability to make offline payments were also studied. In general, the BOJ representatives declared the second phase successful and announced the launch of the CBDC pilot project. The pilot will explore “end-to-end process flow” and expand links to external systems.
There’s no final date for the launch of the pilot project yet, as a decision will be made based on the results of discussions among the Japanese public about the information presented. A separate forum will be organized. The Bank of Japan plans to make the final decision on the launch of the digital yen by 2026.
Recall that the Web3 sector is actively developing in Japan. This process is overseen by the governmental department of the Ministry of Economy, Trade and Industry (METI).
