(6 September 2024 – Japan) MUFG, Mizuho and SMBC are jointly developing a new framework for instant international payments utilising distributed ledger technology (DLT) overlaid on existing payment infrastructure set to go live in 2025 called “Project Pax”.
Japan’s “Big Three” megabanks are commencing a prototype phase with more than ten Japanese and global financial institutions (Fis) with a focus on B2B transactions such as trade settlement.
International payments are currently routed through Swift but must interact with multiple correspondent banks, delaying processing time by between an hour or over a month if a transaction lacks information needed for know your customer (KYC) or anti-money-laundering (AML) regulations for example.
The new system will use stablecoins on the blockchain that are tied to the value of different currencies, which will be sent directly between banks via the existing Swift infrastructure enabling cross border payments to be executed in under a second and banks will not have to invest in any new systems or procedures.
The possibility of retail payments has been slated for future phases of the new payments solution.
“As of 2022, the market for cross-border transfers has reached an immense size of US$182 trillion. Additionally, the G20 has set targets to be achieved by 2027 in four key areas: “Cost,””Speed,” “Access,” and “Transparency.” These fundamental improvements are a major international agenda” Blockchain developers Progmat, Datachain, and TOKI stated in a joint media release.
“By integrating these regulated stablecoins and truly open and secure cross-chain messaging standards with the current cross-border messaging framework, we’re enabling cross-border settlements for enterprises at the speed of the internet.”
“For financial institutions, leveraging existing systems eliminates the need to build new infrastructure from scratch, allowing them to offer new transfer options to their corporate clients while minimising investment. By offering a new network that uses stablecoins for the remittance process between financial institutions, while maintaining the international remittance processes and user interfaces familiar to business enterprises and financial institutions, we can swiftly and realistically deliver the benefits of stablecoins to society.”