Japan's Largest Bank Launches Stablecoin Platform For Banking Institutions

Mitsubishi UFJ Financial Group (MUFG), one of the largest banks in Japan, unveiled its plan of allowing native banks to use its stablecoin issuance platform Progmat Coin to roll out Japanese yen-backed stablecoins on a wide range of public blockchains.

This comes as new legislation prohibits the issuance of stablecoins by non-banking institutions.

Progmat Coin, which is designed to back stablecoin issuance not just by MUFG but among trust banks, will be used to help banks issue their own stablecoins on blockchains like Cosmos, Avalanche, Polygon and Ethereum with more networks to be added soon, the financial group announced.

"Progmat Coin has been developed mainly by Mitsubishi UFJ Trust and Banking, and various stablecoins using this platform will be licensed by intermediaries to handle them in light of the revised Payment Services Act of 2023," the announcement read.

"As soon as the above is completed, issuance and distribution will be possible. In addition, it is envisioned that stablecoins will be issued on various blockchain platforms, including public blockchains such as Ethereum," MUFG further said.

In addition, MUFG also revealed that Toki and Datachain, its blockchain tech and security partners, are currently developing a bridge that will allow cross-chain transactions, swaps and lending between supported blockchains, with the infrastructure anticipated to launch in the second quarter of 2023.

Last February, MUFG launched the Progmat Coin, which is designed to offer interoperable and universal digital asset payment methods for stablecoins and other cryptocurrency assets, as well as central bank digital currency in the country.

The announcement took place after Japan's parliament passed a bill last Friday restricting stablecoin issuance by non-banking institutions.

The bill, according to a report from a local media outlet, noted that the issuance of stablecoins, or digital assets with values pegged to a fiat currency or stabilized by an algorithm, is only allowed on licensed banks, trust companies and registered money transfer agents in the country.

Moreover, the legislation launched a new registration system for financial institutions planning to launch this kind of digital asset and came with anti-money laundering measures.

Japan has reportedly passed the bill to protect investors and the country's financial system from the risks linked to the region's increasingly rapid adoption of stablecoins.

The new bill came months after the so-called algorithmic stablecoin of the Singapore-based blockchain protocol and payment platform Terraform Labs, co-founded by controversial crypto CEO Do Kwon, came crashing down last May. The spectacular collapse dented investors' perception of stablecoins as it wiped clean approximately $40 billion in investments from the crypto market.