As blockchain innovation and digital finance evolve across the globe, central banks have started designing their central bank digital currencies (CBDC). The latest report shows that the central bank of Japan will begin its CBDC pilot in April 2023.
Previously, the central bank had announced it would employ Sweden’s e-krona as a model to launch its CBDC. Japan intends to catch up with China, which has already conducted pilots for its digital yuan across several states.
Japan Wants Less Aggressive CBDC Pilot Than China
The CNBC report noted that Japan would begin its CBDC testing phase by running parallel transactions with private financial companies.
According to an executive director at the Bank of Japan, Shinichi Uchida, customers and retailers would not be part of the upcoming CBDC pilot. However, the executive noted that they hope to improve the CBDC design through the pilot program by exploring various transaction options with private businesses.
As per the report, the central bank wants to prepare ahead if the local government issues a digital yen. In Uchida’s opinion, a digital currency should be tested in the private sector before presenting it to the public. The executive believes phased testing of the CBDC’s framework with the private sector would aid its mass adoption.
Last year, the Japanese central bank said it would adopt a cautious approach in its CBDC development to roll out a product compatible with the domestic monetary system. However, the apex bank also vowed that it would not follow China’s steps but use Sweden as a model in its CBDC design.
Previously, Sweden carried out various pilots to investigate the compatibility of e-krona with the country’s financial system. The Swedish central bank also evaluated the e-krona’s utility for cross-border payments during its pilots. But China employed a more aggressive approach in its CBDC (e-CNY) campaign.
China has already introduced the e-CNY into the system through various promotional campaigns in several local governments. The local authorities issued millions of dollars in e-CNY to residents in several cities, including Chengdu, Beijing, Shenzhen, and many more. They allowed people to transact with digital yuan during last year’s Winter Olympic Games in Beijing.
Top Crypto Exchanges Stop Operations In Japan
While Japan plans its upcoming CBDC pilot, top crypto exchanges want to leave the country. Japan has been a pro-crypto environment, but the high tax charges made it difficult for startups to survive.
A local report revealed that several startup crypto firms left Japan due to burdensome tax payments, which made the business environment unfriendly. Local cryptocurrency groups have been lobbying Japanese lawmakers to ease the corporate tax law. Finally, the lawmakers agreed to review the tax laws.
A December 2022 Bloomberg report revealed that Japan waived 30% corporate tax payment for cryptocurrency exchanges. But the tax relief did not stop crypto exchanges from leaving, as Kraken and Coinbase said they would cease operations in the country.
On December 28, 2022, Kraken said it would delist itself from the Japanese Financial Services Agency by January 31. The exchange cited extreme market conditions in Japan as the reason behind its decision.
Also, on January 18, Coinbase announced would cease operations in Japan. The crypto exchange noted that users in Japan have until February 16 to withdraw their funds from its platforms. The platform stopped allowing fiat deposits on January 20.
Featured image from Pixabay, chart from TradingView.com