Bank of Japan sets up CBDC API Sandbox

The sandbox is not just about setting up a CBDC platform but would cover all the technicalities of creating a CBDC:

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Bank of Japan has recently launched a CBDC API Sandbox. The central bank had run 2 previous proofs of concept for a digital yen, the latest coming to an end about a year ago. Unlike the proofs of concept, the sandbox work will cover not just the CBDC platform, but will involve end-to-end experiments, including with intermediaries. Apart from APIs, the proposal is to explore interoperability with external systems and additional functionality.

The sandbox has extensive industry engagement and there are 5 working groups. Initially, the work is more of desk-based research, however, there are documented plans for experiment-based work.

PRIVACY, SCALABILITY

Some of the areas where newer functionality of the CBDC that are being explored in the current phase are privacy and scalability. It is expected that personal data would be separated from payment data, like in the case of the digital euro. There could be provision to sell data, including details of purchases by the public in case there is consent.

The central bank had initiated a pilot program since April 2023, aiming to conduct technical evaluations not explored in the previous proofs of Concept phases. The 2 specific areas of work specified in the pilot program are development of a system for the pilot program and experimentation, and CBDC Forum where Bank of Japan acts as the secretariat and conducts practical discussions with private businesses related to retail payments.

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