According to a government official, Japan will not have more clarity about the design of its central bank’s digital currency until the end of 2022 at the earliest.

Hideki Murai, chairman of the ruling Liberal Democratic Party’s digital currency panel, said the Bank of Japan was still working to clarify the key functions of the digital yen, such as determining which entities should act as intermediaries between the central bank and which Deposit. Holder.

“By the end of next year we will have a clearer idea of ​​what the Japanese CBDC will look like,” Murai said in an interview with Reuters on Friday. The official said the BoJ does not expect to make an immediate decision on issuing a digital yen at the start of a phase two CBDC study slated to begin next year.

However, more details on the Japanese CBDC design could spark a debate about how the digital yen will affect financial institutions, the official suggested.

Japan’s financial industry is in a state of flux as non-bank companies increasingly offer online payments. If the digital yen is designed to make commercial banks major intermediaries, that change could be reversed, noted Murai, adding:

“If the BoJ issues a CBDC, it will have a huge impact on Japan’s financial institutions and the settlement system. CBDCs have the potential to completely reshape the changes in the Japanese financial industry. “

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The official also said the BoJ needs to ensure the digital yen is compatible with other global CBDCs in order to counter China’s progress with its digital yuan. “If the digital yuan becomes too convenient and widely used by tourists or becomes the main form of payment for trade, the yen-yuan ratio could change,” undermining the yen’s status as a safe haven currency, Murai warned.

The BoJ first announced its plans to develop a CBDC in October 2020, stressing that the bank “has no plans to issue a CBDC”. The bank launched the first phase of the CBDC pilot program in April 2021 with the aim of developing a test environment and testing the basic functions of the CBDC in terms of payments, issuance and issuance, distribution and acquisition.