Since the regulatory issues have been covered and the law only permits trusted companies to issue the tokens, the move can help restore confidence in stablecoins and cryptocurrencies.
Mitsubishi UFJ Financial Group (MUFG) is interested in using its Progmat blockchain platform for minting stablecoins and has been meeting with domestic and international companies for possible collaborations.
The move is in response to Japan’s new stablecoin law that makes the country the first among the major economies to issue a clear stablecoin law. The law recognizes that stablecoins must be pegged to the Yen or another currency that serves as a reserve asset. It also allows only the bank licensed in the country and the registered money transfer agents to issue the token.
Stablecoins are expected to hold a stable value in relation to the asset or currency they are tied to. They are created to hedge against crypto volatility. However, their essence has been compromised a few times in the past. One popular example is the recent TerraUSD (UST) crash, where many investors became bankrupt, losing more than $40 billion in total.
MUFG Minting Stablecoins Can Increase Users Trust and Help Japan’s Economy
It is recognized that the reliability of stablecoins can be traced to the company or organization issuing them. If the company’s reserve is not large enough to back up the token’s value, then it could lose its value. Security breaches are also an issue with stablecoins. Regulatory issues around stablecoin could also affect these coins. With the Japanese law permitting recognized and registered entities to issue and mint the coins, one could argue that it gives a sense of security to stablecoin users.
Since the regulatory issues have been covered and the law only permits trusted companies to issue the tokens, the move can help restore confidence in stablecoins and cryptocurrencies. They can be used as digital currencies since they have the same status as the currency they are tied to, like the USD and Yen.
Though the law allows a company like MUFG to mint and issue stablecoin, it is currently not planning to create any native token of its own but is discussing with different parties and stablecoin companies how to use its blockchain platform, Progmat, to mint stablecoins globally.
The MUFG’s Vice President of Product, Tatsuya Saito, emphasized in an interview that the move will give stablecoin issuers and their users’ confidence in using the digital asset. Although he was not specific about the companies the bank is in touch with, he stated that there are ongoing talks with some financial institutions in Japan, non-financial businesses, and entertainment companies.
Saito also added that there had been inquiries from international entities, which puts Japan in a position where it could become the hub where stablecoins are being issued. In his words:
“This is a great opportunity for Japan.”
Although Japan can still be said to have strict crypto regulation, its Prime Minister, Fumio Kishida, has revealed his plan to support Web3 initiatives. This move can help blockchain projects and companies thrive better in the country.