- Japan develops its CBDC, as do Brazil, Russia, and the European Central Bank
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Programmable payments, privacy, and interoperability
The Bank of Japan (BoJ) published an interim report on its work with the Central Bank Digital Currency (CBDC). The report reveals that a CBDC API Sandbox was launched this month, similar to the Bank of England’s Project Rosalind.
The Bank of Japan conducted two previous proofs of concept (PoCs) for the launch of the digital Yen, the last of which ended a year ago.
Unlike the proofs of concept, the most recent work extends beyond the CBDC platform and involves end-to-end experiments, even with intermediaries. In addition to APIs, interoperability with external systems in general and additional functionalities are being explored.
A key feature of the most recent activity is the extensive industry engagement with five working groups.
CBDC: its additional functionalities
Some examples of additional features explored in the current phase include privacy and scalability. On the privacy front, the central bank wants to separate personal data from payment data, taking the digital euro as an example for its technological development. However, the paper also explores the possibility of selling data, including details about purchases, if users give their consent.
The Bank of Japan suggests that the data distribution function could be external to the central bank and intermediaries.
In terms of scalability, the CBDC platform needs to be able to process tens of thousands of transactions per second during normal periods and over 100,000 transactions per second during peak times.
Other functionalities discussed include compatibility with offline payments, extension of functionality including programmable payments and security.
Working for the digital Yen
The methodology for this exploration was to create 6 working groups, each covering a different topic:
- Connection between the CBDC system and external infrastructure/systems
- Additional services and CBDC ecosystem
- KYC and user authentication/authorization
- New technologies and CBDC
- User devices and UI/UX
- Coexistence between CBDC and other payment methods.