Japanese Banking Giant MUFG Eyes Stablecoin Issuance

Mitsubishi UFJ Financial Group Inc. (MUFG), Japan’s largest banking giant, is engaged in discussions with companies involved in popular global stablecoins and other firms regarding the issuance of such tokens through its blockchain platform, Progmat. This move comes after Japan’s stablecoin law came into effect on June 1, allowing licensed banks, registered money transfer agents, and trust companies to issue stablecoins.

Stablecoin Adoption on Progmat Blockchain

Tatsuya Saito, the Vice President of Product at MUFG, revealed in an interview that the bank is in talks with multiple parties regarding the utilization of Progmat to mint stablecoins linked to foreign currencies, including the US dollar, for global use. Saito emphasized the importance of the newly implemented legislation, stating that “issuers and users can feel safe using stablecoins.” However, he declined to disclose the specific stablecoin projects that MUFG is currently discussing.

Stablecoins serve as integral components within the cryptocurrency sector, providing investors with a reliable means to store their funds between trades involving more volatile tokens. These tokens aim to maintain a steady value, typically pegged to $1, and are often backed by reserves such as cash and bonds. According to CoinGecko data, approximately $130 billion worth of stablecoins are currently in circulation.


Stablecoin Volatility

Despite their intended stability, stablecoins have experienced periodic peg fluctuations, causing disruptions in the crypto markets. For instance, the collapse of TerraUSD in May 2022, which relied on algorithms and trader incentives, led to significant losses amounting to at least $40 billion. As a result, regulators have intensified their scrutiny of stablecoins, prompting Japan to implement legislation that encourages the issuance of tokens fully backed by fiat cash in corresponding currencies.

While MUFG envisions using Progmat to issue security tokens on behalf of third parties, the bank currently has no plans to develop its own stablecoin, according to Saito. He further mentioned that MUFG is engaged in stablecoin discussions with entertainment firms, non-financial businesses, and a consortium of Japanese financial institutions. Overseas financial groups have also expressed interest, indicating the potential for Japan to become a global hub for stablecoin issuance.


Japan’s Economic Rejuvenation

In terms of market share, Tether, the leading stablecoin, represents over 60% of the sector’s total value, followed by Circle Internet Financial Ltd.’s USD Coin. To produce their tokens within Japan, issuers must comply with the country’s stablecoin legislation, which allows stablecoins to be denominated in various currencies, including the dollar. Saito views this regulatory development as a significant opportunity for Japan and aligns with Prime Minister Fumio Kishida’s agenda to rejuvenate the country’s economy under the principles of “New Capitalism,” with support for the growth of Web3 firms, referring to a vision of a decentralized internet built on blockchain technology.

MUFG’s exploration of stablecoin issuance through its blockchain platform marks a significant step toward the adoption of digital assets within the traditional financial industry, potentially paving the way for increased global usage of stablecoins while promoting Japan’s position as a prominent player in the emerging Web3 landscape.