Japan’s Central Bank has no immediate plans to launch a Central Bank digital currency (CBDC) but continues to explore the digital yen in a pilot program.
Bank of Japan (Boj) Director Kazunari Kamiyama spoke at the ninth CBDC collaboration council meeting with June 2. Cash use As a primary factor in the decision to exclude a CBDC, at least for the foreseeable future.
Comments produced a slightly mixed message that came when they did ten days after the central bank released a second Progress report on its digital yen pilot program, involving seven working groups and 64 private companies through the CBDC Forum.
These groups have the task of exploring various aspects of digital currency development through both technical implementation and theoretical research. For example, a working group looks at how CBDCs can be integrated with new technologies, such as distributed main book technology (DLT) – the basis for blockchain technology.
Builds on blockchain
As part of the study, researchers considered placing a CBDC on a public blockchainBut concluded that the approach was not currently viable due to scalability restrictions, privacy problems and board challenges.
While this path to a Widescale CBDC was considered impossible, Pilot identified other potential future paths, including Stock 2 blockchains—Second framework built on top of a warehouse 1 blockchain (eg Ethereum) – which can offer increased scalability and reduce transaction costs.
The pilot program also examined with CBDCs to solve security token transactions on permissible blockchains-not publicly available blockchains-fäven if this approach would require refinancing mechanisms.
Another Avenue explored was to issue a digital asset supported by a CBDC, similar to one Stablecoin. However, it was noted that this would require strict wallet and smart contract white list.
API or Webhook
Outside the basic technology that a hypothetical digital yen was to be built, research also investigated the need for modular, basic application programming interfaces (API) that could be combined to create more sophisticated Applications.
APIs are mechanisms that allow two software components to communicate with each other using a set of definitions and protocols.
While APIs offer valuable functionality, the pilot program found that excessive use could create bottlenecks for performance. For example, API calls can often to verify the implementation of transactions to strain the system.
Instead, the research report “Webhooks” favored data and executable commands sent from one app or system to another when one event occurs, rather than being the request based as APIs. Although APIs can provide more control, webhooks may be faster for real -time updates without having to continue requesting the new information.
The researchers lean on the Webhook technology because of its ability to turn the data flow by driving notifications to users when the transactions are completed.
The working groups have so far investigated these different functions separately, but the central bank said it plans to explore how different elements interact over the system.
Although they have no immediate issue plans, Japan will continue their CBDC research efforts. Meaning, a digital yen is not completely off the table.
Watch: CBDCs are more than just digital money
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