Today the Bank of Japan (BoJ) published a paper about central bank digital currency (CBDC), although it emphasized it has no plans to issue a digital yen.
The Bank outlined three potential motivations for a CBDC. Retail payments in Japan are still dominated by cash. But if that situation were to change, the Bank might need to provide a CBDC as an option. Another reason would be if it was required to improve payment and settlement systems’ stability and efficiency. On this point, there are several private Japanese initiatives, particularly from banks looking to offer digital yen.
And the third CBDC driver is the potential need for a digital yen to support a digital society. For now, there’s quite a push by Japanese institutions to use blockchain and a wholesale CBDC would be useful for on-chain settlement.
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