For global use, MUFG plans to issue stablecoins tied to foreign currencies, including the US dollar
Japan’s Biggest Bank, MUFG, is planning to issue global stablecoins. On June 1, the nation’s legislation on stablecoins came into effect. For minting tokens, MUFG has its Progmat blockchain platform.
To mint such tokens via its blockchain platform, Mitsubishi UFJ Financial Group (MUFG) is in discussions with several companies, including issuers of popular global stablecoins. Japan’s stablecoin law became effective on June 1, and only licenced banks, registered money transfer agents, and trust companies can issue the tokens. For global use, MUFG plans to issue stablecoins tied to foreign currencies, including the US dollar. For third parties, the bank is also working on security tokens.
Tatsuya Saito, the Vice President of Product at MUFG, said that inquiries for stablecoin projects are coming in from overseas financial groups and that Japan could become a global hub for stablecoin issuance. This is a great opportunity for Japan, as Prime Minister Fumio Kishida’s agenda for reinvigorating Japan’s economy includes support for the growth of Web3 firms, which refer to a vision of a decentralised internet built around blockchains, crypto’s underlying technology.
Stablecoins are popular in the crypto sector, where investors often park funds in between trades involving more volatile tokens. They are meant to hold a steady value, usually $1, and are often backed by reserves like cash and bonds. However, causing instability in crypto markets, stablecoins have periodically lost their pegs. Causing losses of at least $40 billion, TerraUSD, a token that relied on algorithms and trader incentives, imploded in May 2022. Since then, the scrutiny of stablecoins has been increased by regulators.
Tokens that are fully backed by fiat cash in a matching currency are promoted by Japan’s legislation. This makes using stablecoins safer for issuers and users alike. The fact that stablecoins can be denominated in dollars and other currencies under the regulation paves the way to issue tokens for overseas use.
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