Japan works towards clearing legislative path for CBDC
Japan appears to be gearing up for the potential launch of its central bank digital currency (CBDC), the digital yen, as the government and the Bank of Japan (BoJ) collaboratively lay the legislative foundation for its rollout.
While neither the BoJ nor the government has officially committed to the CBDC launch, recent developments indicate an accelerated push for its development. The BoJ's heightened focus on digital yen comes amidst concerns about falling behind China's and Europe's rapid progress in the CBDC space.
Overcoming legal issues
According to a report by Japanese media outlet NHK, in a recent meeting, the Japanese government and the BoJ discussed future tasks and legal issues related to its CBDC implementation.
To ensure a smooth and legally unobstructed launch, Tokyo aims to establish the necessary legal framework well in advance. Local news media Coinpost reported that the proposed legislation is set to "assume the introduction of the digital yen" and may involve amendments to key laws such as the Bank of Japan Act, the Criminal Code and the Civil Code. The goal is to finalize the list of required legal amendments by spring of the current year.
In a meeting between Japan's central bank and the Finance Ministry, executives from relevant ministries and central bank directors explored various aspects of the CBDC. Discussions included the collaboration between a potential central bank digital currency and private cashless businesses, with a focus on convenience and personal data protection.
Finance Ministry keen on launch ASAP
Last month, the central bank received a report from a Ministry of Finance expert panel which recommended the launch of the digital yen without delay.
The Ministry of Finance's December meeting addressed the division of roles between the Bank of Japan and intermediary banks, proposing a "two-tiered model" where domestic commercial banks play a pivotal role in digital yen issuance.
Acting as intermediary institutions, these banks will bridge the gap between the central bank and digital yen users. The government and the BoJ are also contemplating ways to involve private businesses in the CBDC project while ensuring fair competition.
Security and data privacy considerations
Key considerations in the discussions involve interoperability with other payment methods, ensuring security and handling user information safely. There is also an exploration of potential cross-border payment options. The government and the BoJ are committed to a comprehensive approach that considers various aspects of the CBDC project.
Japan's unique context in the CBDC landscape is highlighted, with its continued reliance on cash and the presence of multiple private-sector tokenized money initiatives. Notably, the country boasts over 100 institutions and enterprises exploring digital currency through a digital currency forum since 2020.
Separate initiatives, such as the MUFG-backed Progmat DLT platform, contribute to Japan's diverse digital currency landscape. Providing another example of progression in the digital assets arena, it emerged in September that the country is looking to permit startups to raise capital from venture capital firms using digital tokens rather than traditional equity.
