(ATF) Japan took steps to catch up with China in becoming the first nation to use an official digital currency with the central bank beginning tests Monday on a crypto-yen.
The Bank of Japan (BOJ) is studying the feasibility of issuing its own central bank digital currency (CBDC).
The first phase of experiments, to be carried out until March, will focus on testing the technical feasibility of issuing, distributing and redeeming a CBDC, the BOJ said in a statement.
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It’ll then scrutinise more detailed functions, such as whether to set limits on the amount of CBDC each entity can hold.
If necessary, the central bank will launch a pilot programme that involves payment service providers and end users, BOJ Executive Director Shinichi Uchida said last month.
"While there is no change in the BOJ's stance it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step," Uchida told a committee of policymakers and bank lobbies looking into CBDC.
Global central banks are looking at developing digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments.
While China leads the pack, the BOJ has been speeding up efforts to catch up with a plan announced in October to begin experimenting on how to operate its own digital currency.
- Reporting by Reuters