Private Japanese firms have begun exploring decentralized identities, forming a consortium to spearhead the joint effort.
Eight firms came together to launch a digital identity (DID) and verifiable credential (VC) co-creation consortium (DVCC) to explore new use cases. The firms include banking giant MUFG (NASDAQ: MUFG), law office Anderson Mori and Tomotsune, and several Web3 firms, including Fujitsu (NASDAQ: FJTSF), ITOCHU (NASDAQ:ITOCF), TOPPAN Digital, and NTT Data (NASDAQ:NTTDF).
The consortium will pursue self-sovereign identity functionalities, allowing users greater control over their details. The privately run DID project could have several uses in the local economy, including streamlining Know Your Customer (KYC) processes in finance.
The initial group of firms participating in the DID project encourages other companies to join the consortium. The consortium cast a wide net, urging educational firms, blockchain-based companies, and financial service providers to join the league.
The participation of Japan’s largest commercial bank confirms speculation that the product will have applications in financial markets. There are also whispers that the DID project could play a central role in digital securities and digital currencies, especially with the KYC process involving stablecoins.
Japan’s stablecoin rules took effect in June, allowing financial institutions to issue stablecoins. With the new legal and regulatory clarity, MUFG moved to build Progmat Coin, a platform designed to support the issuance of stablecoins on several publicly distributed ledgers like Ethereum (NASDAQ: ETH), Polygon (NASDAQ: MATIC-USD), and Avalanche (NASDAQ: AVAX-USD).
Although the project hasn’t gone live, the issuance platform has onboarded several Japanese entities, the latest being banking behemoth Mizuho Financial Group (NASDAQ: MZHOF).
Apart from finance, pundits submit that a digital identity project will have application in the metaverse, allowing users to “build genuine societies” while exercising control over the data they choose to share. Fujitsu, MUFG, and TOPPAN are founding members of the Japan Metaverse Economic Zone, a consortium exploring Web 3 and metaverse interoperability.
Digital identity triggers regulatory storm
As digitization seeps into every facet of the global economy, digital IDs are quickly becoming popular, with the Philippines Twala, the National Payment Corporation of India (NPCI), and Argentina exploring solutions in the area.
Privately run digital ID offerings like Worldcoin have triggered a regulatory clampdown in several jurisdictions, with Kenya, Germany, and Argentina moving against the iris-scanning project. They argue that the project’s data collection and handling methods may violate existing legal provisions, with Worldcoin denying any wrongdoing.
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