Japanese giants launch private digital currency backed by banks • The Register
A group of more than 70 Japanese organizations decided to create their own blockchain-based digital currency.
The Digital Currency Forum is the entity behind the currency, which has been tentatively dubbed DCJPY. Forum members include four private banks, telecommunications operators, rail operators and industrial giants such as Mitsubishi. The central bank of Japan, the Financial Services Agency and three relevant ministries all have observer status.
The group released a white paper [PDF] this explains how users would “beat” the DCJPY by transferring money from a bank account to a digital currency account stored on a platform built and operated by Forum members. DCJPY holders could transfer the digi-yen to other participants of this platform, or “burn” the currency by transferring it to a bank account. Direct conversion of DCJPY into cash will not be possible at first. The minimum value of a DCJPY would be one Japanese yen.
The white paper suggests that the DCJPY should be issued by banks and seen as creating the same obligations as deposits, as this arrangement is already well regulated and is expected to lead to a faster implementation of a digital currency. The Forum also argues that if digital currencies are tied to deposits, their value will be more stable.
The white paper offers three justifications for developing a digital currency.
One is interoperability between existing stored value mechanisms. Japan’s largest rail operator, the East Japan Railway Company, already allows holders of its “Suica” smart cards to use them to pay for items at stations and some small shops. But, as the white paper points out, such schemes are not interoperable. Forum members believe that a digital currency would solve this problem and enable innovation, for example by allowing operators of stored value systems to become players in payments.
A second reason for the DCJPY is that by offering a digital currency issued by banks, there would be no competition with bank deposits. The Forum also argues that a digital currency could speed up business transaction settlements and lower cash handling costs.
The final argument in favor of DCJPY is that a digital currency is the most suitable mechanism for dealing with smart contracts or for paying for digital assets such as non-fungible tokens.
The Forum hopes that DCJPY testing can begin in 2022, but no date has been set for full implementation. The Forum or the Bank of Japan have also not explained how or if the DCJPY will be linked to Japan’s planned experiments with a central bank digital currency. ®