One of the largest banks in the world, Mitsubishi UFJ Financial Group (MUFG), intends to launch its own digital currency in 2018, according to Japan’s Mainichi News.The bank will issue an ‘MUFG coin’ through an exchange that the bank will also run. Controlling the digital currency exchange allows the bank to mitigate the price volatility sometimes associated with digital currencies. Each MUFG coin will be worth 1 Japanese Yen, similar to the USD Tether which trades at a value of $1 USD per Tether.
Japan has strict regulations regarding money transfers of over 1 million Yen, equivalent to roughly $11,000 CAD.Although the value of the MUFG coin is tied to the Yen, it is not the Yen. Therefore, Yen transfer regulations theoretically do not apply. The digital currency allows the bank to create a loophole around some of the red tape and provide an easier way for customers to send money. If the blockchain circumvents regulations that add costs, sending MUFG coin should also end up less expensive than sending a traditional wire transfer. Customers who purchase MUFG coins on their exchange can make payments through the MUFG network. These transactions record on the blockchain automatically. The automated system ends up simpler and less expensive for the company to run; these saving would then passed onto the customer.
MUFG also plans to create a network of stores across Japan that will accept the MUFG coins. Consumers pay merchants for transactions through a smartphone app. With the app, blockchain technology reduces fees associated with other digital payment methods like credit and debit cards.The popularity of Asian digital payments app WeChatPay likely inspired MUFG, at least in part. Customers using messaging app WeChat can link a bank account to their app and pay via a QR code. The service is extremely popular and has started to replace cash transactions in many parts of Asia.
In an effort to bridge the gap between fiat and digital currencies even further, MUFG plans to create Bitcoin accounts for its customers, according to the website Finance Magnates.The decentralized nature of digital currencies, however, lacks some of the security we expect from traditional banks. This would typically deter a lot of investors from considering a new platform. MUFG plans to tackle these security issues by adding additional layers of security to its Bitcoin account, such as monitoring for suspicious activity. These advanced features may help to further the adoption of digital currencies in Japan.
Japan is one of the most technologically advanced countries in the world. Innovation from Japan often influences our culture, especially in regards to technology. A month before MUFG’s announcement, the Canadian Central Bank published a paper on their investigation into the benefits of creating a Central Bank Digital Currency (CBDC). While Canada is ahead on researching digital currency, it seems Japan is ahead in the race to launch one.If MUFG coin is a success in Japan, other banks may follow suit with similar projects. Whether Canadian banks will offer additional layers of security with Bitcoin accounts or issue a digital currency, though, remains to be seen.Image credit: MUFG
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