A group of over 70 Japanese organisations have decided to create their own blockchain-backed digital currency.
The Digital Currency Forum is the entity behind the currency, which has been provisionally dubbed DCJPY. The Forum’s membership includes four private banks, telcos, railway operators, and industrial giants such as Mitsubishi. Japan’s central bank, Financial Services Agency, and three relevant ministries all have observer status.
The group has published a white paper [PDF] that explains how users would “mint” 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 in that platform, or “burn” the currency by transferring it to a bank account. Direct conversion of DCJPY to cash won’t initially be possible. The minimum value of a DCJPY would be one Japanese Yen.
The white paper suggests DCJPY should be issued by banks and considered to create the same obligations as deposits, since that arrangement is already well regulated and should result in 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 rationales for developing a digital currency.
One is interoperability between existing stored value mechanisms. Japan’s largest railway operator, the East Japan Railway Company, already allows holders of its “Suica” smart cards to use them to pay for items in railway stations and some smaller stores. But, as the white paper points out, such schemes aren’t interoperable. Forum members believe that a digital currency would fix that issue and allow innovation – such as allowing operators of stored value schemes to become payments players.
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 settlements for commercial transactions and reduce cash-handling costs.
The final argument for the DCJPY is that a digital currency is the most appropriate mechanism with which to transact smart contracts, or to pay for digital assets like non-fungible tokens.
The Forum hopes that DCJPY tests can commence in 2022, but no date has been set for full implementation. Nor has the Forum or the Bank of Japan explained how or if the DCJPY will relate to Japan’s planned experiments with a central bank digital currency. ®