As Japan continues its work in payment innovation, the FSA has officially announced its support for a stablecoin pilot project involving the country’s three largest banks.
The experiment brings together Mizuho Bank, MUFG, and SMBC in a coordinated effort among the megabanks to jointly issue a stablecoin for payments, the FSA said in a statement on Friday. Other members of the partnership include Mitsubishi Corporation, Progmat Inc., and Mitsubishi UFJ Trust & Banking Corporation.
How does this work?
The statement says the initiative, while maintaining regulatory compliance and appropriate operating procedures, would explore ways in which various banking organisations might cooperatively produce so-called stablecoins classed under Japanese law as “electronic payment instruments”.
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As per the FSA, the project’s objective is to confirm whether such a system can be implemented “lawfully and appropriately” under existing financial regulations.
For the organisation, the project is expected to run well into the foreseeable future, commencing in November 2025. The experiment’s findings, including legal and compliance implications, will be published on the FSA’s website in due course.
The pilot is the first project under the FSA’s recently created Payment Innovation Project (PIP), a specialised program that was introduced on Friday with the goal of accelerating blockchain-based payment innovations. The FinTech Proof-of-Concept Hub, which has been supporting fintech projects since 2017, is where PIP functions.
Details revealed by Nikkei earlier this month are confirmed by the FSA’s notification. The partnership is viewed as a crucial step in updating Japan’s financial system and facilitating quicker, more effective digital transactions between institutional networks.
Other developments
The first legally recognised stablecoin valued in yen, JPYC, was introduced by Japanese fintech business JPYC Inc. last month.
JPYC Inc. announced that it would start issuing the JPYC token on Monday in addition to unveiling its specialised issuance and redemption platform, JPYC EX. The company registered as a fund transfer service provider with Japan’s Financial Services Agency in August.
Additionally, the FSA has proposed a major regulatory shift that may remove cryptocurrencies from the Payment Services Act and place them under the Financial Instruments and Exchange Act (FIEA).
They said that many of the problems facing the cryptocurrency industry, such as fraudulent disclosures, unregistered companies, fraud, and inadequate security measures, had characteristics more like past problems dealt with by securities legislation.
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