The Bank of Japan (BOJ) has announced the results of the second phase of a proof-of-concept (PoC) test of a central bank digital currency (CBDC) and confirmed that its CBDC pilot project they launched as planned in April. Phase two PoC runs for one year, from April 2022 to March 2023, and considers functions to complement the basic ledger functions tested in the year-long trial.
According to the BOJ report, the second phase tested the technology to implement upper limits on CBDC holdings, described as “safeguards that ensure the stability of the financial system.” in the event of a sudden transfer from a bank account to a CBDC. That includes cases where a single user has multiple accounts with multiple intermediaries. User convenience in initiating and scheduling payments was also examined.
In the backend, tests were carried out with the database language and ledger design, while testing a flexible token-of-value model. A dispatching system has been implemented to process multiple transactions with the same account faster.
The test assumes 100,000 users with 5 intermediaries and considers a load of 500 and 3,000 transactions per second, with a discussion of growing scalability. Privacy was reviewed throughout but not discussed at length. Offline payments were discussed in the context of fraud prevention and privacy protection.
The PoCs have been declared successful in achieving the desired results and the report has confirmed that the BOJ has moved on to its scheduled CBDC pilot project. The pilot program will test “end-to-end process flow” and other connections to external systems. The report stated:
Whether or not to issue a CBDC should be decided by discussions among the Japanese public.
The CBDC Forum will be created to gather insights from private businesses. The BOJ has stated that it will make the final decision on the issuance of a CBDC in 2026.