Bank of Japan publishes progress report on CBDC “pilot experiment”

Norbert Gehrke
Tokyo FinTech
Published in
3 min readApr 22, 2024

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The Bank of Japan today published a progress report on the “pilot experiment” on a central bank digital currency (CBDC) as of April 2024. The pilot experiment consists of two pillars: 1) construction and verification of an experimental CBDC system, and 2) the CBDC Forum for discussions with private businesses.

For the experimental system, the Bank is building an account-type CBDC ledger to be shared between a central system and intermediary systems. This expands on the proof-of-concept phases which focused just on the central system ledger. The pilot system covers everything from user wallets/apps to the intermediary and central systems. It aims to handle high transaction volumes, featuring performance testing and consideration of privacy measures. While not specified yet, the system design allows for potential future functionality expansion.

In parallel, the Bank has established the CBDC Forum with 64 private companies to discuss various working group themes related to CBDC. The status and key points from the first five working groups are summarized:

  • WG1 — Connection to External Infrastructure/Systems:
    Discussed connection methods between the CBDC system and existing financial infrastructure like accounting systems. Covered topics like business requirements for issuing/redeeming CBDC, online/batch processing, 24/7 operation, and interface considerations.
  • WG2 — Additional Services and CBDC Ecosystem:
    Examined concepts around a potential CBDC ecosystem enabling additional services from businesses. Discussed programmability, API standardization, data utilization, authentication/authorization, and creating a competitive environment. Launching an “API sandbox” initiative.
  • WG3 — KYC and User Authentication/Authorization:
    Organized the current status and trends of KYC, anti-money laundering, and user authentication for existing payment services. Covered necessary methods for CBDC, balancing risks, usability, security guidelines and information sharing.
  • WG4 — New Technologies and CBDC:
    Just started considering new backend technologies like alternative ledger data models (e.g. UTXO) and database innovations that could be leveraged for CBDC, as well as coexistence with other payment methods/assets.
  • WG5 — User Devices and UI/UX:
    Will discuss overall system design for user devices/apps and UI/UX, ensuring accessibility and usability in various situations like offline/disasters.

Additional themes are planned, like administrative workflows for basic CBDC functions and horizontal coexistence with other payment methods.

The Bank aims to steadily advance CBDC discussions through the pilot experiment using both system construction/testing and the CBDC Forum, though no decision has been made yet on actual CBDC issuance in Japan.

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Norbert Gehrke
Tokyo FinTech

Passionate about strategy & innovation across Asia. At home in Japan. Connector of people & ideas.