This article is an English translation of the original Japanese post published on July 16, 2024, prepared in response to requests for an English version. 

From June 2021 to June 2024, I was seconded to the Bank of Japan, where I worked on exploring the potential issuance of a Central Bank Digital Currency (CBDC) in Japan. While the official term for this is “CBDC,” the media commonly refer to it as the “Digital Yen.” Accordingly, this blog will also use the term “Digital Yen” to refer to Japan's potential CBDC.

That being said, even if we use the more intuitive term “Digital Yen” instead of “CBDC,” many people still do not have a clear understanding of what it actually is. According to a 2022 survey on currency-related issues commissioned by the Ministry of Finance (in Japanese only), only about 5% of respondents stated that they had heard of CBDCs and understood their specifics. (Although this data is from a few years ago, awareness may have improved since then.) Furthermore, a quick internet search for “Digital Yen” in Japanese often suggests “What is the Digital Yen?” as the top result.

During my tenure at the Bank of Japan, I frequently encountered questions and comments such as: “Does the Digital Yen mean the Bank of Japan is issuing Bitcoin?” “How is it different from e-money currently available?” and “If Japan does not move swiftly to launch a Digital Yen, there is a real risk that the e-CNY could gain a dominant foothold—even within Japan.” This illustrates that the general public’s understanding of the Digital Yen remains relatively low.

At the same time, discussions within the Bank of Japan and the Japanese government have been steadily progressing. In October 2020—nearly four years ago—the Bank of Japan released “The Bank of Japan's Approach to Central Bank Digital Currency”, outlining its stance on CBDC. Since April 2021, the Bank has been conducting proof-of-concept experiments and a pilot program to assess the technical feasibility of a Digital Yen. In April 2023, the Ministry of Finance, which oversees currency system, established an expert panel on CBDC. Subsequently, in January 2024, the government and the Bank of Japan set up “Relevant Ministries and BOJ Liaison Meeting on CBDC” to develop a broad framework for CBDC system design.

Internationally, CBDC research and development have also gained momentum. For example, in the European Union, the European Commission proposed an EU regulation for the Digital Euro on June 28, 2023. Unlike the Digital Yen, which remains an informal name, the Digital Euro is the official name. On November 1, 2023, the European Central Bank initiated the “preparation phase” for issuing the Digital Euro.

Considering this situation—where domestic and international discussions on CBDC are advancing, but public understanding in Japan may still be lagging—this blog aims to contribute, however modestly, to improving awareness of the Digital Yen and deepening discussions on its legal aspects. In upcoming posts, I will explore various topics related to the Digital Yen based on public materials and my own insights. (Please note that the topics and order may be subject to change.) Stay tuned!

Upcoming Topics:

1. How Might the Digital Yen Be Used, and What Would Its Legal Tender Status Mean?
2. Intermediaries in the Digital Yen Ecosystem: Who Might Be Involved and How They Could Be Regulated
3. Can the Digital Yen Balance Privacy with AML/CFT Requirements?
4. What Kinds of Value-Added Services Could Be Built Around the Digital Yen—and Who Would Provide Them?
5. Should There Be Limits on Digital Yen Holdings or Interest-Bearing Features?
6. What Is the Legal Nature of the Digital Yen? A Claim, a Property Right, or Sui Generis?
7. Should “Digital Yen Counterfeiting” Be Treated as a New Criminal Offense?