The country that wants to switch to digital money right from 2021: how would the system work?

Although we consider ourselves to be in the age of digitalization, we cannot see a digital element crucial to progress – digital currency.

Of course, there are cryptocurrencies and some attempts or proposals towards a single and official digital currency. But there are still steps to be taken until we really have digital currencies.

That, of course, if the Japanese don’t show us that things are possible and that’s it faster than we thought.

More than 30 major Japanese companies will begin experimenting with issuing a common private digital currency next year to promote digitization in one of the world’s most cash-loving states.

The move follows the recently announced plan by the Bank of Japan to experiment with the issuance of digital yen, underscoring a growing awareness of the need for Japan to keep abreast of rapid global advances in financial technology.

The idea is simple: a single digital currency and an aggregate system

The group, made up of the three largest Japanese banks, as well as brokerages, telecommunications companies, utilities and retailers, will conduct experiments to issue a digital currency that will use a common settlement platform.

“Japan has many digital platforms, none of which are large enough to exceed cash payments,” Hiromi Yamaoka, a former BOJ executive who leads the group, said in an online briefing.

“We do not want to create another silo-type platform. What we want to do is create a framework that makes different platforms mutually compatible, “said Yamaoka.

Private banks will be tasked with issuing digital currency in the experiments, although the possibility of other entities issuing a digital yen will not be ruled out, he clarified.

Japan is among the most cash-loving countries in the world, with cashless payments accounting for only 20% of total settlements – well below the United States, for example, which has 45% cashless payments or China with 70%.

Authorities have been keen to promote cashless transactions to increase productivity, although progress has been slow, in part due to the inconvenience of non-aggregated digital payment.

Different digital platforms in Japan compete and remain incompatible with each other, unlike China, where only a number of huge platforms dominate the market.

The three Japanese mega-banks – Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. – have each launched their own digital payment systems. But they lag behind the efforts of technology companies, such as SoftBank Group’s PayPay unit.

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