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Digital currencies are being investigated by private-sector behemoths in Japan as a way to streamline huge fund transfers and settlements.
A group of over 70 Japanese corporations, including some of the country’s largest financial institutions, has teamed up to test and deploy a new yen-based digital currency in fiscal 2022, sending a strong indication that the private sector is warming to blockchain-based payment systems.
The new digital currency, dubbed “DCJPY,” will be backstopped by bank deposits and rely on a common platform to expedite large fund transfers and settlements among the participating companies, according to Kazuhiro Tokia, the chief executive of cryptocurrency exchange DeCurret.
The partnership, which comprises Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group, is led by DeCurret. Japan Post Bank Co Ltd., Nippon Telegraph and Telephone Corp., East Japan Railway Co., and Kansai Electric Power Co Inc. are also part of the partnership. According to Reuters, the group has been meeting on a regular basis since 2020 to discuss the creation of a new digital payment settlement platform.
In terms of total deposits, Mitsubishi, Mizuho, Sumitomo and Japan Post Bank are among Japan’s five largest financial institutions.
Within the public sector, the Bank of Japan has prioritized the development of a central bank digital currency, or CBDC, with a focus on providing seamless payment channels between the so-called digital yuan and electronic payment services. While the BOJ is spearheading this effort, the end goal is to incentivize private-sector uptake of a CBDC. As reported, the Bank of Japan’s CBDC pilot tests are expected to be completed by March 2022.
The deposit-backed infrastructure being developed by the consortium aligns with the BOJ’s CBDC framework, according to DeCurret adviser Toshihide Endo, who previously served as head of Japan’s Financial Services Agency.