The central bank of Japan will reportedly start testing the employment of a digital yen in April this year. 

The institution has previously said they could take Sweden as a model for how to launch a CBDC.

Catching up With China

As reported by CNBC, the testing phase includes processing simulated transactions with private financial companies. Shinichi Uchida – Executive Director at the Bank of Japan – said consumers and retailers will be excluded from the experiment.

“Our hope is that the pilot program will lead to improved designs through discussion with private businesses,” he stated. 

The testing aims to prepare Japan’s central bank in case the local government issues a digital version of the national currency. Uchida thinks such a financial product should be presented to the private sector before going live:

“If a CBDC were to be issued in the future, exploring its framework in such a phased manner and engaging in highly transparent communication with the private sector are necessary steps to take for adoption in society.”

The central bank assured a year ago that it will cautiously approach the CBDC and ensure its compatibility with the domestic monetary ecosystem. It also vowed to follow Sweden’s example and not copy China’s steps.

The Scandinavian country has conducted experiments to investigate how a digital krona will fit into its financial network and whether it can utilize cross-border payments.

China, on the other hand, has introduced an aggressive campaign to popularize its e-CNY. The local authorities distributed millions of dollars worth of the product to the residents of several cities, including the capital Beijing, Chengdu, Shenzhen, and others. They also allowed the employment of digital yuan during the Winter Olympic Games held in Beijing last year.

Exchanges Flee From Japan

The Japanese government recently approved a bill according to which cryptocurrency issuers will no longer have to pay 30% corporate tax on their holdings. Despite the less strict rules, some leading trading venues such as Kraken and Coinbase said they will exit the local ecosystem.

The former pointed out the unfavorable conditions in the Japanese market and the decline of the cryptocurrency industry as primary reasons. 

Coinbase followed suit shortly after, citing similar factors. Local users had until February 16 to withdraw their funds from the platform.

Binance, though, sought a permit in September last year to re-enter the “Land of the Rising Sun.” It strengthened its presence in the region in November, acquiring Sakura Exchange BitCoin (SEBC).