MUFG Deploying Bank Backed Stablecoin Platform
(14 June 2023 – Japan) Japan’s largest lender, Mitsubishi UFJ Financial Group (MUFG) has revealed plans to introduce and distribute stablecoins backed by banks on various public blockchains.
MUFG reported that its “Progmat Coin” platform launched in Q1 2022 as a universal digital asset payment method for stablecoins, cryptocurrencies and central bank digital currencies (CBDCs) would be open to all Japanese banks seeking to float JPY-pegged stablecoins on a range of public blockchains. The bank’s support for stablecoins brings much needed credibility and legitimacy to the market.
The announcement was hot on the heels of a significant change in Japanese law regarding stablecoins. On 1 June, a new bill came into effect setting a governing code around stablecoins (cryptocurrency backed by a reserve asset). Japan is the first major market to put a regulatory environment around stablecoins into law with the bill mandating stablecoins be pegged to the JPY or other legal tender with guaranteed redemption to the holder at face value. They can only be issued by banks and trust companies - non-banks are banned from issuing stablecoins.
The recent legal revision in Japan primarily introduces a registration system for stablecoins circulation and reinforces anti-money laundering measures. Additionally, it enables overseas businesses to issue stablecoins in the country through custodians of digital assets. MUFG plans to collaborate with blockchain infrastructure providers TOKI and Datachain to create a bridge to facilitate cross-chain transactions between distributed ledgers.
“TOKI is developing a “cross-chain bridge” that enables cross-chain transactions between public blockchains, and is scheduled to be launched in 2023. In addition to inter-blockchain communication technology with excellent security and scalability using IBC and LCP developed by Datachain, we have strengths in highly efficient liquidity mechanisms” the companies said in a joint media release statement.
“MUFG highlighted several use cases for the functionality, including cross-chain swap, payment, and lending across several public blockchains. A full-scale launch for the functionality is expected in Q2 2024 and will cover transactions involving governance tokens and non-fungible tokens (NFTs).”