Japan Opts for Sweden’s CBDC Approach as ‘Better Fit’ Than China’s
Japan’s central bank digital currency (CBDC) design approach will take after Sweden’s measured steps rather than China’s large-scale pilot tests, the head of the Bank of Japan (BOJ) payment system department has said.
Kazushige Kamiyama said in an interview that Sweden’s “staged and planned expansion of experiments” is a better fit for Japan, talking of the e-krona’s smaller-scale technical research and a proposed test this year to determine its suitability as a settlement system with other digital payment providers.
Unlike China which has been testing its digital yuan (e-CNY) on a large scale, Sweden’s central bank only recently confirmed the completion of the second phase of the e-krona pilot project which began in February 2021.
The Riksbank notes that Phase 2 investigates whether and how the e-krona might function off-line, whether the performance of the tested solution is adequate, and how banks and other payment service providers could be integrated into its network.
Meanwhile, despite its knowledge of how an e-krona could be designed and would function has increased as a result of the pilot, the Riksbank says “no decision has yet been taken on whether to issue an e-krona or on what technical solution or legal framework it might be based”. Rather, it looks to a third phase where the requirements for a future e-krona will be investigated.
Going by a public consultation launched by the European Commission on its digital euro initiative, Europe generally is not keen on CBDCs. It is the opposite with China where less cash is being used every day. More so, the e-CNY has been tested across several Chinese cities in the past two years with over 140 million wallet accounts, more than eight million merchants accepting the digital currency as at the end of December 2021 and its use for transactions worth up to US$13.8 billion, according to Zou Lan, head of financial markets at the People’s Bank of China.
Like Sweden, Japan has not decided to issue a CBDC.