Yen-Pegged Stablecoin: Japan Banks Plan Crypto Innovation

Background

Three of Japan’s largest financial institutions—Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bank—are collaborating on a new yen-pegged stablecoin, Cointelegraph reported on Friday. The banks serve more than 300,000 corporate clients and are leveraging MUFG’s Progmat platform to develop the new stablecoin. The initiative aims to modernize corporate settlements, reduce transaction costs, and increase efficiency in financial transactions across Japan’s business sector.

Contents

With plans to standardize the token, the consortium intends for the yen-pegged stablecoin to be interoperable for payments both internally and among different companies. The rollout of the stablecoin is expected by the end of this year, according to the report.

Adoption and Technology

The first application of the yen-pegged stablecoin will be by Mitsubishi Corporation. With a network of more than 240 subsidiaries worldwide, the company is set to use the stablecoin for internal settlements, particularly for processes such as international transfers related to dividends, acquisitions, and customer transactions. This move is designed to cut fees and lower administrative costs.

MUFG’s stablecoin issuance platform, Progmat Coin, will underpin the new asset. Launched earlier this year, Progmat Coin enables Japanese banks to issue yen-based stablecoins on several public blockchain networks, including Ethereum, Polygon, Avalanche, and Cosmos. MUFG has indicated plans to expand to more networks in the future.

In addition, in September 2023, Binance Japan and Mitsubishi UFJ Trust and Banking Corporation (MUTB) formed a partnership to explore the issuance of stablecoins via Progmat Coin. Binance Japan general manager Takeshi Chino noted, “Stablecoins are crucial for the broader financial ecosystem,” highlighting their expected role in the evolution of financial services and Web3 adoption, as reported by Cointelegraph.

Market Reaction and Outlook

Japan’s regulatory environment is showing increased support for digital assets. In August, Nikkei reported that the Financial Services Agency (FSA) was preparing to authorize yen-based stablecoins, with fintech firm JPYC poised to lead the initial rollout. Meanwhile, the Monex Group also announced plans to possibly launch its own yen-pegged stablecoin, with Chairman Oki Matsumoto warning that, “the company risked being left behind if it didn’t move into stablecoins,” according to Cointelegraph. However, Matsumoto acknowledged such initiatives may require considerable infrastructure and capital investment.

Analysts say that if the current project by the three megabanks is successful, it could establish Japan’s first national bank-backed stablecoin network. This unified framework may set a precedent for further adoption of stablecoins in the country’s mainstream financial infrastructure.

As Japan continues to open its regulatory landscape to crypto technology, more companies are expected to explore the use of yen-pegged stablecoins for efficiency and cost-reduction in both domestic and cross-border transactions. Interested readers can learn more about trends in cryptocurrency.

What’s Next?

According to Cointelegraph, the consortium aims to launch the yen-pegged stablecoin by the end of 2024, pending internal deployment and further industry testing. With Mitsubishi Corporation leading implementation, observers will be watching the operational impact and how quickly wider adoption will follow among Japan’s corporate sector. The evolving regulatory approach from the FSA and growing participation from both established banks and emerging fintech firms suggest a dynamic period ahead for the integration of stablecoins in Japan’s financial markets.