The Bank for International Settlements (BIS), in collaboration with a group of seven central banks, published its first joint report on digital central bank currencies on 9 October, focusing on the underlying principles and fundamental characteristics of the central bank’s digital currencies.
Together with the report, the Bank of Japan, a member of the group, published a paper outlining the central bank’s own approach to digital currencies from a Japanese perspective.
According to a report from the Bank of Japan, the first of several rounds of testing of the central bank’s digital currencies will begin sometime in 2021. It will include developing a test environment for the currency and testing its core functionality as a payment instrument.
The Bank of Japan report says that the main function of digital currency should be flexibility in dealing with infrastructure that has been disrupted as a result of force majeure, as they say:
“Offline operation during system and network downtime and power outages is also important to Japan due to the frequent occurrence of natural disasters.”
Due to its geographical location, Japan is vulnerable to a number of natural disasters, including earthquakes, tsunamis, floods, hurricanes, tornadoes and volcanic eruptions.
The report does not provide details on how such incidents will occur, although there are solutions that address potential power outages or network outages in Bitcoin (BTC) and other blockchain-based cryptocurrencies.
This includes the development of mesh networks based on long-wave radio transmitters and the Blockstream satellite network, which broadcasts bitcoin transactions across space.
The BIS Digital Currency Research Group was announced in January 2020 and includes the central banks of Japan, Canada, the United Kingdom, Sweden, Switzerland and the European Central Bank. Since then, the US Federal Reserve has joined the group.