What is the difference between the Bank of Japan and China’s digital renminbi when it launched a pilot CBDC?


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The main functions of the Japanese CBDC pilot program are in fact fully undertaken by intermediaries, and the Bank of Japan only played a role in leading the project.

Original title: “[ChainDeExclusive] Bank of Japan will not All in CBDC, or it will “reap the profits”
Written by: Mori Goro

The Bank of Japan announced on April 5 that the central bank’s digital currency landing experiment, which has been prepared for two years, will start today, and it is expected to be at the end of March 2022 for a period of one year.

This landing pilot is the first step in the experimental plan, that is, to build a complete system structure. It will mainly test the feasibility of the digital currency issued by the central bank in the payment field, including basic functions such as issuance, remittance, and repayment.

On March 26, the Bank of Japan led the convening of the “Japan CBDC Public-Private Liaison Conference”. The main participants included the Ministry of Finance, the Financial Services Agency, the Bank of Japan, as well as private banks and payment companies. The conference is mainly responsible for information sharing between related private enterprises and the government, as well as the discussion of future policies and issues, and will be held from time to time in the future.

Shinichi Uchida, director of the Bank of Japan, said at the meeting, “The prosperity of CBDC began in these one or two years. As far as the situation in our country is concerned, at first some people said, “I think cash is safer, and people basically have their own bank accounts.” “Does Japan really need a CBDC?” There are also questions such as “There is currently no specific case reference, even if there is, there is no need to go so far.” Although this is true, we should also look at the world. In countries now In fact, we are reviewing the domestic CBDC environment, and everyone must have a deep understanding.”

He added that if the Bank of Japan does issue CBDC, “it must be designed according to the future image of the payment system… CBDC is like a raw material, we need to use it to cook dishes. This dish is called to provide users with convenient settlement services. .”

Will the Bank of Japan All in?

Last month, Bank of Japan President Haruhiko Kuroda called for the integration of all the forces that can be integrated to pave the way for the implementation of CBDC. However, he also believes that it is necessary to consolidate the bank’s position. For details, please refer to the previous report of Linkde, “The Bank of Japan Governor Kuroda: The main promotion of the “central bank as a service” strategy, there is no plan to issue CBDC for the time being.

However, whether it is based on the project purpose of the “Japan CBDC Liaison Council” or the speech of the Bank of Japan Governor Haruhiko Kuroda, it can be seen that the Bank of Japan has no intention of AII in.

What is the difference between the Bank of Japan and China's digital renminbi when it launched a pilot CBDC?

The Bank of Japan’s Policy on Central Bank Digital Currency issued by the Bank of Japan on March 26, 2021 shows that the Bank of Japan’s basic views on CBDC are as follows:

  1. In the context of the rapid development of information and communication technology, digitization is developing in all fields of the world. Given the speed of technological innovation, the social demand for CBDC in the future may increase dramatically.
  2. Currently, the Bank of Japan has no plans to issue CBDC, but from the perspective of ensuring the security and efficiency of the entire payment system, it is very important to be fully prepared to deal with various changes in the future environment.
  3. Therefore, we will cooperate with internal and external stakeholders to conduct pilot projects and conduct cooperation at the institutional design level.
  4. It is necessary to work with many stakeholders to explore an ideal payment system suitable for the digital society. In addition to the cash payment function, CBDC can also be used as a starting point for private enterprises to innovate and become the basis for providing various new payment services.
  5. As long as there is demand for cash in the market, the Bank of Japan will continue to provide cash responsibly.

From the project design point of view, there is no structure of All in either

The above documents also show the structural design of the CBDC pilot. The Bank of Japan actually disclosed the structure design outline of the pilot a long time ago. The CBDC of the Bank of Japan is mainly a general-use digital currency for consumers. It adopts a two-tier structure of “indirect issuance.” The explanation given by the Bank of Japan is : The issuance of general-use CBDC needs to maintain the stability of the dual system structure of the central bank, commercial banks, and local banks. Therefore, it is necessary to adopt an “indirect” type of issuance.

In fact, the main functions are completely undertaken by the intermediary agencies, and the Bank of Japan only played the role of leading the project. But the ambitions of the Bank of Japan do not stop there. President Haruhiko Kuroda has always emphasized that the Bank of Japan must not only become a “bank within a bank,” but also build a “bank as a service” concept to take away individual and corporate users from private institutions.

This style of play may not work in Japan. The four major private banking giants are involved, and they will not obediently let the Bank of Japan carve up the market. Even the central bank has moved to grab the pie of commercial banks, and there is no such thing as a commercial bank just waiting to be slaughtered.

Outsourcing began in the first phase of the pilot

According to the Bank of Japan document, the first stage of the proof of concept is mainly to realize the basic functions of digital currency issuance, transaction circulation, and recovery. The main task of this experiment also includes the basis of the CBDC system-the collection and construction of transaction information contained in the distributed ledger. It is limited to the deposit system of the Bank of Japan, the system of the intermediary institution, and the simple use of the wallet of the end user to set these.

The Bank of Japan stated that the CBDC pilot will be completed at the Bank of Japan’s Clearing Agency Bureau, and partners of outsourcers will be selected through tenders.

From the beginning, the Bank of Japan had no plans to All in.

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