The testing phase will see private banks in Japan fully in charge of issuing private digital currency.
Following the recent announcement that Japan would launch its Digital Yen in around April 2021, 30 firms based in the country have sought to follow the approval of the regulatory body on digital currency to launch a separate private digital currency. The private digital currency expected to be tested in 2021 is meant to lead the evolution of digitization in the country.
Financial Technology has been in the advanced stage globally with several economic superpower countries considering the introduction of such to accelerate the much anticipated cashless world.
According to the report, the firms that engineered this idea are utility and retailers, telecommunication, brokerage, and three of Japan’s biggest banks. The group is chaired by the former Bank of Japan Executive Hiro Yamaoka. According to him, Japan has over the years seen the introduction of several digital platforms that are not big enough to overtake cash payment. In this case, they intend to come out with a platform that will be mutually compatible with the already existing ones.
The testing phase will see private banks fully in charge of issuing private digital currency.
The group clarified that there may be possibilities of other firms or entities being mandated to issue the private digital currency.
The rising adoption rate of private digital currency or payment platforms has been very impressive in Japan with three megabanks boasting of their initiatives.
Mizuho Financial Group Inc, Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc have already launched their payment platforms. Japan has been said to have a favorable atmosphere for the emergence of digital platforms since they remain incompatible as they compete. This is unlike other countries where only a few emerge as the dominant force of the financial market. Japan currently has a cashless payment of 20% out of the total Payment settlement. Though this is far below the 70% of China and 45% of the US, Japan has shown a positive response to the cashless system that is taking the country by storm in the beginning stage.
The BoJ Digital Yen and the Private Digital Currency in Japan
The private digital currency yet to be introduced by the Japanese firms may have companies and households as the potential users just like the Digital Yen. However, the Digital Yen is meant to complement the digital economy. The BoJ explained that the Central Bank Digital Currency would be issued into the system when there is a future drop in circulation.
The CBDC is currently being observed by several countries with the likes of South Korea, France, and Sweden testing it for possible use. China has currently surpassed the development phase and in the mass testing phase.
The private digital currency to be launched by the Japanese firms is expected to influence others to take the financial technology ecosystem in the country more seriously.
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