Japan’s central bank has started planning a central bank digital currency (CBDC) experiment with the country’s major financial players, according to a major newspaper report today.
The Bank of Japan is working with three megabanks as well as regional banks in the Asian nation—and next year will trial a digital yen, Nikkei reported Wednesday.
If all goes according to plan, the newspaper added, the BOJ may go ahead and release a CBDC in 2026.
The BOJ’s experiment will explore how deposits and withdrawals can work with a digital yen, today’s report noted.
A CBDC is a digital version of a state’s fiat currency—like the U.S. dollar or the euro—backed by a central bank. CBDCs are digital assets, but are different from the likes of Bitcoin, Ethereum, or Dogecoin.
This is because Bitcoin and other cryptocurrencies are decentralized; their ledger of transactions is maintained and checked by a distributed network of validators. CBDCs, by contrast, are centralized: a central power—the government or central bank—controls them. Different countries around the world are in different stages of researching and releasing CBDCs.