Can Japan’s CBDC End the Cryptocurrency Gridlock in the U.S.?

This article is brief:

-The Bank of Japan (BoJ) plans to review the launch of the Central Bank Digital Currency (CBDC) in 2024, with a launch as early as 2026.

-The BOJ is testing the CBDC payment process and has achieved transaction speeds of 500-3,000 transactions per second for 100,000 users.

-Banks in Japan are exploring stablecoin settlement systems, and Mitsubishi UFJ Trust will announce a new blockchain system in 2023.

The Bank of Japan (BoJ) announced that it will review plans to launch a central bank digital currency (CBDC) in spring 2024. This follows a number of pilots that are expected to lead to the future of cryptocurrencies and digital fiat currencies in Japan.

According to the January 22, 2024 announcement, the central bank could launch a CBDC as early as 2026. since the first pilot in May 2023, a digital yen has been in the works.Bitmain Miner

Japan’s CBDC pilot is at an advanced stage

The Bank of Japan is currently testing an end-to-end CBDC payments process involving external system connections. Overall, the second phase achieved transaction speeds of 500-3,000 transactions per second between 100,000 users through five intermediaries.

The Central Bank Digital Currency is a government-issued blockchain version of money. It allows central banks, retail banks and retail customers to settle fiat currency transactions faster than traditional banking tracks. Under the CBDC’s architecture (several have been proposed and/or implemented), transactions will be recorded and synchronized in real time.

Percentage of cashless payments in Japan | Source: Statista

In addition, the central banks of the United Arab Emirates, mainland China, Hong Kong and Thailand have tested a CBDC highway called mBridge to connect regional banking traffic. Strengthening ties with Russia has accelerated China’s ambitions to settle trade on private blockchain infrastructure.

U.S. CBDC News Reveals a Different Path than Japan’s

The topic of the CBDC is increasingly becoming a politically partisan issue in U.S. news. This is happening as the primaries reach their climax. In addition, free speech advocates argue that CBDC lays the groundwork for a social scoring system and government tyranny. In an anti-CBDC bill called the ABDC Anti-Surveillance Act, Republican Tom Emmer aims to stop the Federal Reserve from unilaterally issuing CBDCs.

“The bill limits the Fed’s ability to (1) provide direct services to individuals and (2) use central bank digital currencies. Central bank digital currencies are digital currencies (e.g., Bitcoin or Ether) issued by a government-backed central bank.”Whatsminer Miner

However, the CBDC issue appears to be less politically charged in Japan, which has one of the oldest regulatory frameworks for cryptocurrencies. The government introduced the law in 2014 after the collapse of bitcoin exchange Mt. Gox. Additionally, upcoming updates may include legislation to exempt certain businesses from paying taxes on crypto assets.

History of cryptocurrency regulation in Japan |Source: blockchain week Korea

Japanese banks are also fully supportive, with several of them exploring stablecoin settlement systems. In 2023, Mitsubishi UFJ Trust announced the launch of a new blockchain system connecting several banks, Japan Exchange Group and NTT Data.