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Standardization in Information Technology related to Digital Currencies

June 9, 2021
Payment and Settlement Systems Department
Bank of Japan

Summary

Various standardization efforts have been made to support the smooth processing of financial services such as deposit-taking, loans, and credit transfers by banks as well as brokerage of securities transactions by securities companies. Standards have been developed in the area of message formats for transmitting transaction information, structures for numbering and coding transaction data, and security measures such as encryption methods.

Standardization has contributed to enhancing operational efficiency at financial institutions and the safety and convenience of the services provided to customers by (i) ensuring interoperability among systems that process financial transactions and (ii) ensuring the reliability of the systems. As modern financial services are supported by highly advanced technologies, the standard-setting process also has the benefit of (iii) bringing together and utilizing expertise, and it is becoming increasingly important for a wide range of parties, including businesses and experts, to participate in these international standardization activities.

In recent years, various services by payment service providers have emerged, in addition to the traditional funds transfer and remittance services typically provided by banks. There have also been moves to explore the possibility of new digital currencies issued by private entities, such as stablecoins based on blockchain and/or distributed ledger technology (DLT).

The benefits of standardization in financial services (i.e., ensuring interoperability, ensuring reliability, and bringing together and utilizing expertise) are applicable to digital currencies, and existing international standards in the field of financial services can serve as a useful reference.

These benefits are also applicable to central bank digital currency (CBDC) in many ways. The Bank recognizes the need for cooperation and collaboration with a wide range of stakeholders, including private-sector businesses and experts, as well as for leveraging the cooperative efforts among central banks, in its ongoing consideration of CBDC. The Bank will also closely coordinate with stakeholders in Japan in the area of international standardization related to CBDC.

Notice

This document is an English translation of the Japanese original published on May 25, 2021. Please contact the Payment and Settlement Systems Department in advance to request permission, when reproducing or copying the content of this report for commercial purposes. Please credit the source when reproducing or copying the content of this report.

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