The three major banks in Japan will work together as a group of 30 private sector participants to try out the digital yen. According to a Reuters report released on November 19, the organization is composed of banks, various brokerage companies, utilities, telecommunications companies and retailers.
The chairman of the new group, Yamaoka Hiromi, said that for experimental purposes, private banks will be responsible for issuing currency, although the possibility of other actors involved in the issuance is not ruled out. Yamaoka is a former manager of a Japanese bank and has been focusing on the development of the digital yen in recent months.
Japan is known for its slow acceptance of cashless payments: cash still accounts for 80% of the country’s total bills, compared with 55% in the United States and 30% in China.
Japan’s leading banks Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group have previously developed customized digital payment systems including digital tokens.
However, the idea of the new company is to avoid using the “Slio platform” and the decentralized digital payment landscape. Yamaoka said:
Japan has many digital platforms, but none is better than cash payments. […] We want to create a framework to make all platforms compatible with each other. ”
Given that private banks are currently developing a common infrastructure for billing for digital yen demonstrations, the parties may hope that the combined efforts will show that they are sufficiently competitive to compete with smartphone-based payment processing services (such as Competing by Competing’s joint venture PayPay) SoftBank, Paytm and Yahoo Japan.
Earlier this week, Yamaoka outlined the challenges of issuing digital yen to Japanese banks and private financial institutions, including the possibility of large inflows of private bank deposits. He said:
“The basic and very difficult problem is how to ensure the existence of private deposits and the coexistence of the central bank’s digital currency. You don’t want funds to flow out of private deposits. In this case, issuing digital currency to the central bank is meaningless. This Not universal.”
Yamaoka suggests that to solve this problem and the convenience and interoperability of different platforms will require close cooperation between the central bank and the private sector.