October 9, 2020 B a n k o f J a p a n The Bank of Japan's Approach to Central Bank Digital Currency Executive Summary Digitalization has advanced in various areas at home and abroad on the back of rapid development of information communication technology. There is a possibility of a surge in public demand for central bank digital currency (CBDC) going forward, considering the rapid development of technological innovation. While the Bank of Japan currently has no plan to issue CBDC, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the Bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner. With this in mind, the Bank decided that it would publish its approach to "general purpose" CBDC -- that is, CBDC intended for a wide range of end users, including individuals and firms. Expected Functions and Roles of CBDC There are two main variants of CBDC: "wholesale" CBDC and "general purpose" CBDC. Expected functions and roles of general purpose CBDC, if introduced in Japan, are summarized in the following. Introducing a Payment Instrument alongside Cash For the time being, it is unlikely that the cash in circulation would drop significantly. If, however, this should become the case, and if private digital money will not substitute for the functions of cash sufficiently, the Bank might provide general purpose CBDC as a payment instrument alongside cash. As long as there is public demand for cash, the Bank will stay committed to supplying it. Supporting Private Payment Services Even without the decline in cash circulation, if CBDC is needed from the viewpoint of enhancing the stability and efficiency of the overall payment and settlement systems, it might become appropriate to issue CBDC in order to support private payment services.
