The Bank of Japan announced Monday that it has begun Phase 1 of central bank digital currency (CBDC) experiments.
The first phase of experiments will focus on testing the basic functions of CBDC as a payment instrument, such as issuance, distribution, and redemption. Phase 1 will be carried out through March 2022.
The Bank of Japan will then move to Phase 2 to test more detailed functions of CBDC, as it announced last October. If necessary, the central bank will move to Phase 3, in which private businesses and end-users will participate in a pilot program.
The Bank of Japan currently has no plans to issue a CBDC, but it wants to remain prepared if the need arises in the future, the central bank's executive director Shinichi Uchida said last month.
"We believe that initiating experiments at this stage is a necessary step," Uchida said at the time. "Given the current factors at play, including technological developments at home and abroad, there is a reasonable possibility for CBDC to provide a means of payments and settlements and for such systems to become global standards."
Central banks around the world are looking at developing digital currencies, as The Block's recent CBDC report noted. Currently, China leads the pack since it is closer to launching digital yuan after research and development of over six years.