The Bank of Japan (BOJ) Has Unveiled Outcomes Of Its Second Phase CBDC Pilot Initiative

The Bank of Japan (BOJ) has unveiled the outcomes of the second phase of its experimental initiative for a central bank digital currency (CBDC). Confirming the planned launch of the CBDC pilot project in April, the second phases of the proof of concept occurred from April 2022 to March 2023. The results of the pilot have now been disclosed.

During the initial phase, the BOJ constructed an experimental environment that assessed the viability of various design options for a CBDC ledger, focusing on evaluating its core functions. In the subsequent phase, the bank explored additional functionalities and examined the potential use of new technologies, not previously included in Phase 1, in terms of data models and databases.

The BOJ’s report highlights that the second phase involved testing technology to implement maximum limits on CBDC holdings. These limits were deemed as safeguards to maintain the stability of the financial system in case of a sudden shift from bank accounts to the CBDC, including instances where a single user possessed multiple accounts across various intermediaries.

The study also assessed user experience regarding initiating and scheduling payments. According to the BOJ, the results indicated that the throughput (number of transactions processed per second) matched the rate of requests sent per second, demonstrating no performance bottlenecks caused by resource limitations.

Comparing the second phase to the first, there was a slight increase in latency (transaction processing time), with a more skewed distribution due to greater processing complexity and involvement of multiple systems. However, overall, no significant degradation in performance, with latency typically remaining under 200 milliseconds (0.2 seconds), even under high loads.

With the successful completion of the proofs of concept, the Bank of Japan has initiated a pilot program. This program aims to examine the end-to-end process flow, explore measures and potential challenges associated with integrating external systems, and address any considerations or solutions identified during the proof of concept stages.

For its next steps, the Bank of Japan plans to establish a CBDC Forum, which will foster institutional agreements for CBDC implementation in a suitable manner. Leveraging insights and perspectives shared by private companies involved in retail payments, the forum will contribute to further research and analysis.

The Bank of Japan emphasizes that the decision to issue a CBDC should be made through public debates among the Japanese population, acknowledging the importance of involving and considering the views of the general public in shaping the future of a potential CBDC.

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