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One of Japan’s largest commercial banks, Mitsubishi UFJ, plans to launch a new stablecoin to help trade settlement using blockchain technology.
According to a report in local news outlet Yomiuri Shimbun, the plans for the stablecoin were completed at the end of 2024. Mitsubishi UFJ’s stablecoin in Japan will be tailor-made to facilitate bilateral trade and enhance processes within the financial industry.
Help Solve Social Issues
The bank’s Trust and Banking CEO Hiroshi Kubota noted that they planned to eliminate the requirement for a letter of credit or a bank guarantee by ensuring real-time settlement between vendors and purchasers. The CEO said his company was making “final adjustments” on the coin before rollout. Kubota stated that the stablecoin would initially be used in the carbon credits trading sphere. He said that stablecoins would:
“Expand trade settlements and other uses” since “[Stablecoins] are low-cost and allow for faster settlement. [The coin] is revolutionary and will contribute to solving social issues.”
Drive Web3 Adoption
Since 2023, Binance’s Japan unit has been working with Mitsubishi UFJ Trust and Banking Corporation to develop a stablecoin in Japan. The bank and Binance conducted a joint study on issuing the stablecoin that would be pegged on the yen while complying with local laws, which would help drive Web3 adoption in the country. During the time, the company stated:
“Through this joint study, both companies aim to issue new stablecoins to help accelerate the mass adoption of Web3 in Japan.”
In-Line with Japanese Laws
Traditional banking depends on conventional systems that are clogged up to facilitate trade settlements. However, challenges such as foreign currency restrictions, volatility, and delays associated with confirming the authenticity of letters of credit slow down the process. Mitsubishi UFJ experts proposed stablecoin-based trade settlements with escrow features such as smart contracts. The modern feature helps reduce counterparty risks as stablecoins will only be released upon delivery of goods.
According to the report, Mitsubishi UFJ will hold the stablecoin reserve asset in accordance with local Japanese laws. The bank is part of a wider Mitsubishi UFJ Financial Group. The latter is one of the world’s most prominent financial services players, and it has been working on a program to launch a stablecoin in Japan and stablecoin interoperability platforms for several years.
Conclusion
Starting with a pilot study, Mitsubishi UFJ plans to team up with Web3 wallet service provider Ginco, stablecoin platform Progmat Coin, and export settlement firm Standage. The aim is to create a solution that will operate in all emerging Southeast Asian markets, with participants piloting the initiative on Japanese exports. All the participating firms will leverage their combined wealth of experience in blockchain, finance, and trade settlement to ensure the stablecoin in Japan project meets its objectives.
Frequently Asked Questions (FAQs)
How many types of stablecoins exist?
Four primary stablecoin types are identifiable by their underlying collateral structure: fiat-backed, crypto-backed, commodity-backed, and algorithmic stablecoins.
Which assets are most stablecoins pegged to?
Stablecoins are mostly pegged to reserve assets like fiat currencies or gold. Their relative price stability has made stablecoins popular compared to other cryptocurrencies. However, regulatory uncertainty and transparency issues still dog the sector.
Who controls stablecoin?
While computer code issues cryptocurrencies like Bitcoin on a network that no particular individual or company controls, most stablecoins, on the other hand, are issued by a company. The issuer is responsible for ensuring the value of stablecoins remains linked to something more stable in value, such as a country’s currency.
What is the purpose of stablecoins?
Stablecoins are designed to create a stable and reliable environment to facilitate cryptocurrency adoption and eliminate its speculative nature. They offer the best of both worlds—the security and decentralization of cryptocurrencies with the stability of fiat currencies.
Appendix: Glossary of Key Terms:
Cryptocurrency: Any form of digital or virtual currency that uses cryptography to secure transactions.
Stablecoin: A digital asset that remains stable against a pegged external traditional asset class.
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