Japan’s largest commercial bank, MUFG (NASDAQ: MUFG), has confirmed plans to explore a new stablecoin solution for trade settlement based on blockchain technology.
The stablecoin offering will be tailor-made for bilateral trade in emerging markets to improve processes in the industry. The plan seeks to eliminate the requirement of a letter of credit or a bank guarantee by ensuring real-time settlement between vendors and purchasers.
Starting with a pilot study, MUFG says it will team up with Web3 wallet service provider Ginco, stablecoin platform Progmat Coin, and export settlement firm Standage.
The solution will be deployed for emerging Southeast Asian markets, with participants piloting the initiative on Japanese exports.
Participating firms are expected to leverage their combined wealth of experience in blockchain, finance, and trade settlement to achieve the project’s objectives. If all goes according to plan, parties to a cross-border transaction can circumnavigate the hassle of third parties to save both time and cost.
Traditionally, trade settlements using conventional banking systems are clogged with several issues ranging from foreign currency restriction to volatility and delays associated with confirming the authenticity of letters of credit.
Experts expect MUFG’s proposed stablecoin-based trade settlement offering to have escrow features hinging on smart contracts. The nifty feature will reduce counterparty risks as stablecoins will only be released upon delivery of goods.
However, for all its perks, it remains to be seen how the offering intends to solve the challenge of sanctions. The study also has to grapple with the issue of the choice of stablecoin to experiment with, given the status of foreign-issued stablecoins in Japan.
MUFG will hold the stablecoin reserve assets in line with Japanese regulations. MUFG-backed Progmat is expected to bring its stablecoin issuance platform to the mix, while Standage will introduce its blockchain solution for electronic bills of lading to track goods across the supply chain.
Progmat Coin makes significant progress
MUFG’s Progmat Coin has emerged as Japan’s leading stablecoin issuance platform, garnering support from key financial sector players. In the last quarter of 2023, Mizuho Bank became the latest firm to support the issuance platform ahead of its formal rollout in 2024.
Executives at Progmat Coin are reportedly eyeing collaborations with the Japan Exchange Group (NASDAQ: JPXGY) and NTT Data (NASDAQ: NTDTY) amid stiff industry competition. Several lenders have rolled out their stablecoin offerings without leaning on Progmat Coin’s solutions, casting a shadow of doubt over the project’s future.
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