Japan's Three Major Megabanks Complete Joint Issuance of Stablecoins and International Payment Demonstration—Preparing for Corporate Issuance

Japan's three major megabanks have announced the completion of a joint issuance of yen-denominated stablecoins and a demonstration of cross-border (international) payments in collaboration with Mitsubishi UFJ Trust and Banking Corporation and TISI Corporation.

This initiative involves Mizuho Bank, Mitsubishi UFJ Bank, and Sumitomo Mitsui Banking Corporation. The goal is to reduce the time and costs associated with traditional international remittances and inter-company payments, while aiming to enhance operational efficiency and the payment process using smart contracts.

Overview of the Joint Issuance Model and International Remittance Demonstration

The demonstration was conducted based on a scheme adopted as part of the Financial Services Agency's PIP (Fintech Demonstration Hub and Payment Enhancement Project).

According to the joint press release, a trust agreement was established with the three megabanks as "joint trustees" and Mitsubishi UFJ Trust and Banking Corporation as the "trustee," issuing stablecoins as "specific trust beneficiary rights" (trust-type stablecoins) under the Payment Services Act. This format qualifies as an electronic payment method and includes clear legal protections distinct from general cryptocurrencies.

The use case for the experiment assumed remittances and payments between Mitsubishi Corporation's domestic and overseas locations. In addition to the issuance, circulation, transfer of stablecoins, and redemption for fiat currency, technical verifications for anti-money laundering (AML) and counter-terrorism financing (CFT) measures, as well as the safety and reliability of various systems, were confirmed.

Features of the Technical Infrastructure and Network

The system's foundational structure employs blockchain technology with advanced security and high throughput.

Part of the infrastructure integrates technologies such as the digital asset platform Progmat led by MUFG (Mitsubishi UFJ Financial Group) and the Avalanche network, along with systems developed by Sumitomo Mitsui Banking Corporation and TISI, facilitating the construction of a reliable bank-led digital yen network.

Additionally, while there are international remittance solutions utilizing Ripple's RippleNet and XRP in the domestic blockchain market, this bank-led stablecoin does not directly replace or eliminate those options.

A bank-led managed network is expected to handle the strict governance required for inter-company payments, while existing open networks cover other international remittance needs, fostering a complementary ecosystem.

Prospects for Commercialization and Future Challenges

Following the results of this demonstration, the participating banks have gained a clear sense of the feasibility of the joint issuance model and the operational foundation. They have already established a dedicated council to discuss governance and operations, aiming to commence actual commercial transactions by the fiscal year 2026.

In the practical implementation phase, safe circulation among corporations and users who have completed KYC (Know Your Customer) at banks is anticipated, backed by bank deposits as underlying assets.

Moving forward, it is expected that compliance with regulations, user protection measures, stable system operations, and cybersecurity will be thoroughly addressed, alongside collaboration with various business areas, including the trade settlement platform TradeWaltz, and accelerated discussions on the on-chain integration of deposits and financial assets.

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