November 25, 2021
Japan’s largest banks, including MUFG, SMBC, Mizuho and Japan Post, are collaborating on a digital currency payment system as part of the Digital Currency Forum, a consortium of 74 organizations. The initiative is led by startup DeCurret which attracted a $62 million investment in March, including from SMBC, MUFG and SBI.
The project has completed the Proof of Concept (PoC) stage with plans to commercialize it by March 2023.
The consortium includes a wide array of organizations, including many in financial services, big industrial companies such as Mitsubishi, electricity (Kansais Electric) and telecoms (KDDI). Several government agencies are observers such as the Financial Services Agency, the Ministry of Finance and the central bank.
A working name for the platform is Digital Currency JPY (DCJPY), and the intention is that bank deposits will back the currency, and hence the DCJPY will be a liability of each of the banks.
Users will request DCJPY, which will withdraw money from their bank account and provide the tokenized cash. However, so far, DCJPY can only be transferred to other account holders at the same bank. Extending it to interbank transfers is being explored.
A whitepaper published today describes the system as two-tier using a permissioned blockchain. This refers to a banking tier or ‘common area’ versus a ‘business process area’ for specific industry use cases, which we’re guessing could be separate DLT networks. In fact, there are separate coins for each business area, but these are synchronized with the “common” banking area.
Separate groups are exploring several use cases, including electric power P2P trading, security tokens, retail payments, industrial settlements, regional coins, and NFTs.
Outside of this project, some consortium participants are working together to rapidly progress security tokens, including MUFG, SBI and Nomura.
So far, the DCJPY initiative seems domestically focused, although it has an eye on expansion. The big three banks MUFG, SMBC and Mizuho are all shareholders in Fnality, formerly known as the Utility Settlement Coin (USC), which plans to enable international interbank payments using multiple digital currencies backed by central bank money.
Another similar initiative is Singapore’s Partior, a multicurrency interbank payment network backed by JP Morgan, DBS Bank and Temasek. However, with DCJPY the focus is on enabling digital currency payments for blockchain business networks.
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