Japan's central bank is backing a scheme that could see the the cash-dependent country move toward a digital currency built on blockchain technology.

The J Coin, as it's to be called, is under development by a group of Japanese banks with the blessing of financial regulators. According to the Financial Times (paywall), it's meant to launch in time for the 2020 Tokyo Olympics as a way to streamline the country's financial system.

At the moment, some 70 percent of all financial transactions in Japan use cash—a far higher amount than occurs in most developed countries, where cash has been on the decline for some time now. Relying so heavily on hard currency exacts costs in the form of transaction and handling fees, as well as the expenses associated with moving all those notes and coins around. Cash transactions are also easier to hide from regulators, and India, for example, cited shutting down the black market as one reason it decided to push aggressively towards digital money.

The idea for J-Coin is that it would sit alongside the Japanese yen, exchanged at a one-to-one rate, and be offered as a free service. In return, the banks that operate it would get detailed data on how people use it (as we've discussed before, that will indeed make people easier to track).

Whether or not the consortium adopts a blockchain-based currency, though, remains to be seen. At the moment one of the country's big financial institutions, Mitsubishi UFJ Financial Group, is testing MUFG coin, which is based on blockchain. The FT reports that some 1,600 of the company's employees already use it as a way to pay for business expenses, for example. There have been talks about whether MUFG coin might join the J-Coin initiative, but nothing has been decided yet.

If it does, it would join a growing number of government-backed efforts around the world to explore blockchain-based currencies as the future of their money systems (for an in-depth look at the trend, see our recent piece, "Governments Are Testing Their Own Cryptocurrencies").