A consortium of more than 70 banks, financial service providers and other leading companies in Japan will conduct a series of proof of concept (PoC) trials of a digital currency supported by commercial banks across a range specific use cases with the goal of expanding the currency by the end of fiscal 2022.
The Digital Currency Forum began researching digital currency issuance and settlement options in Japan in November 2020 and has now posted a progress report and a white paper with a ‘draft scenario’ for a digital currency – currently known as DCJPY – and a two-tier interoperable digital currency infrastructure.
The forum examines “methods of issuing and settling private sector digital currencies denominated in yen” and states that it also seeks to create an infrastructure that supports central bank digital currencies (CBDCs) and “instruments cross-border â.
âIt is assumed that the DCJPY digital currency will be issued by commercial banks as liabilities, which are similar to bank deposits,â the white paper explains.
âThe Digital Currency Forum also envisions that digital currency, DCJPY, can organically connect with other digital platforms.
In other words, the forum aims to realize a form of ‘digital payment as a service’, in which various economic activities and businesses can add payment and settlement functions as one of their far-reaching services. by incorporating the scheme of digital currency in accordance with their own business needs.
âThe activities of the Digital Currency Forum do not conflict with ongoing discussions regarding stablecoins and CBDCs. On the contrary, they are complementary to each other, âadds the forum.
The two-tier infrastructure consists of a “common area” – “a structure shared by all digital currencies issued under the program and will contain value information and be charged for issuance and burning” – and a “Zone commercial process [â¦] responsible for the distribution of digital currency â.
âSo far, we have created a draft scenario for PPSS that straddles the common area and the business process area and the possible goals and objectives that digital currency is expected to achieve,â the forum said.
âIn the field of technology, we are actively promoting verification from various angles towards the realization of digital currency issued by private entities, including the exchange of opinions between engineers from various fields and the mutual use of a sandbox environment for digital currency platforms.
According to the forum, some of the 10 subcommittees investigating individual use cases will be ready to implement PoC trials “by the end of 2021”. Use cases that could be tested include retail payments, supply chain transactions, industry regulations, value and peer-to-peer exchanges, non-fungible tokens, electronic money, and regional currencies.
“Based on the outcome of the PoC, the sub-committees will continue their efforts to commercialize the DCJPY digital currency and the platform that supports its operation by the end of fiscal year 2022,” the forum said.
The Digital Currency Forum is led by the cryptocurrency exchange DeCurret with members including MUFG Bank, Sumitomo Mitsui Banking Company, Mizuho Bank, Seven Bank, NTT, East Japan Railway Company, Kansai Electricity Company and Hitachi.
The Bank of Japan announced that it would begin testing the concept of a CBDC in October 2020, but said in October of this year that “there is no change in the bank’s position that it “does not currently intend to issue CBDC” “.
âHowever, while ‘to issue a CBDC’ is an important decision, ‘not to issue a CBDC’ is also an important decision as an initiative to seriously explore the potential for issuing CBDCs is underway around the world.
âIf the CBDC is not to be issued, we need to think about how to create payment and settlement systems suitable for an increasingly digital society. In either case, maintaining the status quo is not an option.