According to reports, the Bank of Japan will begin testing the use of a digital yen in April this year. The agency has previously stated that they could use Sweden as a model for launching a CBDC.
According to CNBC, the testing phase included processing simulated transactions with private financial firms. Consumers and retailers will be excluded from the experiment, said Shinichi Uchida, executive director at the Bank of Japan. The test is designed to prepare Japan's central bank in case the local government issues a digital version of its national currency. Uchida believes that such financial products should be presented to the private sector before going live: “If a CBDC is to be issued in the future, exploring its framework in this phased manner and communicating with the private sector with a high degree of transparency is a necessary step for social adoption.”
The central bank assured a year ago that it would approach CBDCs with caution and ensure their compatibility with the domestic monetary ecosystem. It has also vowed to follow the example of Sweden, not China. The Scandinavian country conducted experiments to see how the digital krona could fit into its financial network and whether it could leverage cross-border payments.
China, on the other hand, has launched an aggressive campaign to promote its e-yuan. Local authorities distributed products worth millions of dollars to residents of the capital, Beijing, Chengdu, Shenzhen and other cities. They also allowed the digital yuan to be used during last year's Winter Olympics in Beijing. The Japanese government recently approved a bill under which cryptocurrency issuers will no longer have to pay a 30% corporate tax on their holdings. Despite the less stringent rules, some leading trading venues such as Kraken and Coinbase have indicated that they will exit the local ecosystem.
The former pointed to unfavorable conditions in the Japanese market and the decline of the cryptocurrency industry as the main reasons.
Soon after, Coinbase followed suit, for similar reasons. Local users have until February 16 to withdraw funds from the platform.
However, Binance applied for permission to re-enter the “Land of the Rising Sun” last September. It strengthened its presence in the region in November with the acquisition of Sakura Exchange BitCoin (SEBC).
