Japan’s three largest banks have completed a trial of a jointly issued, yen-pegged stablecoin for cross-border payments, Trade Finance Global reported. Mizuho Bank, MUFG Bank and SMBC announced the result on 16 October, following tests covering the creation, transfer and conversion of the digital currency back into yen.
The trial took place from 17 to 23 July with Japanese technology company TISI and Mitsubishi UFJ Trust and Banking Corporation. Payments moved between Mitsubishi Corporation’s Japanese and overseas offices, allowing participants to examine both the regulatory requirements and operational procedures involved in using the stablecoin across borders.
The arrangement was established under Japan’s Payment Services Act, with the three banks jointly serving as principal trustees, or issuers. SMBC provided the blockchain platform developed by TISI, which also linked the digital wallet system to the issuance system. Supported by Japan’s Financial Services Agency, the exercise examined whether multiple issuers could operate together while satisfying anti-money laundering and counter-terrorism financing requirements, according to Trade Finance Global.
Mitsubishi UFJ Trust and Banking acted as agent trustee, managing the funds backing the stablecoin. Those funds are held in bank deposits to support a stable value. Access is restricted to users who have completed identity verification, while the joint structure allows the coin to reach customers of all three issuing banks. The report said circulation would not be capped, reflecting the banks’ expectation of large-scale use.
The project comes against a backdrop of limited consumer understanding of stablecoins. A Visa survey cited by Trade Finance Global covered 14,250 consumers in 14 Asia-Pacific markets and found that only 6% understood them accurately. Some 46% said they were likely to use stablecoins within five years, compared with 16% who reported using them during the previous 12 months.
Although the participants said the test demonstrated that joint issuance and redemption were workable, the design remains subject to change before launch. Their next task is to address outstanding issues in consultation with Japanese and overseas regulators. The banks identified protection for users, cybersecurity and reliable system operation as priorities for further development.