Japan’s SMFG expresses interest in stablecoin launch
Sumitomo Mitsui Financial Group (SMFG), a leading Japanese multinational financial services corporation and holding company, has outlined plans to launch a stablecoin.
In a press release published on its website on April 2, the company outlined details of a memorandum of understanding (MOU) it has signed with a view towards initiating discussions on the commercial use of stablecoins.
Among the parties that have signed the MOU is Sumitomo Mitsui Banking Corporation (SMBC), Japan’s second-largest bank and a core unit of SMFG’s overall business. Other parties include local IT firm TIS, Inc., digital asset infrastructure firm Fireblocks and Ava Labs, the creator and developer behind the Avalanche layer-1 blockchain.
Developing a framework for stablecoin issuance
The agreement will see these stakeholders collaborate in an effort “to develop a framework for stablecoin issuance and circulation, including exploring key technical, regulatory, and market infrastructure requirements both in Japan and further afield.”
The initiative will seek to examine a number of stablecoin use cases that SMFG believes can best leverage the characteristics of stablecoins. These include “a settlement method for tokenized financial and real-world assets (RWAs), such as government and corporate bonds, as well as real estate.”
The company acknowledged that the tokenization of RWAs has been growing rapidly, with stablecoins emerging as an important settlement tool. It also acknowledged their growing use in the areas of international remittances, corporate payments and small-value, high-frequency transactions.
SMBC sees potential in the use of stablecoins to reduce reliance on intermediaries where cross-border payments are concerned, improving upon traditional finance which relies on use of the SWIFT financial messaging network. It has identified savings that can be made in terms of the time taken to effect cross-border transactions and associated costs.
According to a report published by Japanese financial news outlet Nikkei on April 1, Ava Labs is expected to use its know-how in order to construct the foundational basis for the stablecoin.
Meanwhile, Fireblocks will be responsible for the development of a management system for any stablecoin token that is subsequently issued as a consequence of the initiative. It will also get involved with the development of system security in relation to the project.
The bank will work with TIS to support the developmental phase of the project. While the initiative is currently at the planning stage, trials are scheduled to begin during the second half of this year.
If all goes to plan and work proceeds as per the schedule that has been established, a stablecoin could potentially be issued as a consequence sometime in 2026.
It’s not the first time that SMBC has delved into consideration of stablecoins. Last September, it joined with Mitsubishi UFJ Financial Group (MUFG) and Mizuho to launch Project Pax, a cross-border stablecoin transfer platform. That initiative relies upon Progmat, a distributed ledger technology (DLT) platform founded by MUFG for the purpose of tokenization and the issuance of stablecoins.
Japanese legislators have been working towards adding an amendment to the Payment Services Act, with some changes proposed relative to stablecoins. The changes would permit greater diversity in terms of stablecoin reserves.
