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Japan prepares pilot program for digital yen transactions by 2023

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The Central Bank of Japan (BoJ) and the three largest financial institutions in this country are preparing a two-year pilot program with a and in digital for a period of two in order to verify if this type of badgeaccording to reports in the Nikkei newspaper.

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During the program, the BoJ will work with private sector banks to test account deposits and withdrawals to see if the digital currency can function without internet access in an emergency.

Based on the results obtained from the pilot test, the Japanese entity will decide whether to go ahead with the use of a digital yen from 2026, according to leaks published during the early hours of this Thursday.

The Bank of Japan is one of the central banks exploring the deployment of a digital currency as a complement or eventual substitute for cash, as online economic activity increases.

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Other countries and regions that are exploring this type of currency are China, the United States or the European Union (EU).

The BoJ has already carried out an internal test in this regard that lasted between 2021 and this year to test the basic functions of a digital currency, such as its issuance and circulation. The program that would be put into operation next year would be the final stage of the test.

The Japanese central bank is also reportedly working with private financial technology companies and IT providers to develop security measures such as identity verification.

Beyond the technical issues, trading a digital yen requires the participation of the public, still deeply rooted in cash in Japan, and the adaptation of national laws and relevant systems for its use, which will take some time.

The BoJ will continue to issue cash alongside the digital yen, according to the Nikkei.

Unlike other types of cryptocurrencies that are accepted at certain merchants, the digital yen should be able to be used anywhere cash is accepted for convenience.

In 2016, Japan became one of the first countries to regularize cryptocurrencies such as bitcoin, the most popular currency of this type, which is characterized by its decentralization and by using blockchain and cryptography technologies to ensure your safety.

The rise of cryptocurrencies has put financial authorities and central banks around the world on guard, who see in these virtual currencies a potential vehicle for illicit activities, as well as a long-term threat to their control of monetary policy.

In this sense, the establishment of a digital currency managed by the central bank would seek to reduce those risks, although its deployment faces its own challenges, such as hacking and the management of users’ personal information.

(With information from EFE)

Source: Gestion

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