Three of Japan’s largest banks are among major players joining a study group looking at developing a digital payment system that may address concerns about cryptocurrencies.
Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group, and Sumitomo Mitsui Financial Group – institutions that control more than $6.6 trillion in assets between them – will participate in a study group to determine the feasibility of a national digital payments solution.
Japanese cryptocurrency exchange DeCurret, which is hosting the study group, said in a statement Wednesday, that the members would “examine and discuss challenges and solutions concerning digital currencies and digital settlement infrastructure, to find a consensus toward their realization.”
Aside from major banks, the group will include big players from a whole range of sectors. Telecoms giant KDDI Corporation, for example; as well as the East Japan Railway Company, the country’s largest rail operator; and Mori Hamada & Matsumoto, one of the “Big Four” law firms.
On the regulatory side, both the Bank of Japan (BoJ) and the Financial Services Agency (FSA), will participate as observers, alongside representatives from government departments, including Finance and the Ministry of Economy and Internal Affairs.
Topics up for discussion include how a proposed digital payment system would operate, and potential use cases, both in Japan and overseas. They will also examine service provision and conversations around the setting of infrastructure standards.
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Reuters, which reported the story, argued that a digital payment system shared in common between banks, big business and regulators could harmonize and re-focus existing attempts to encourage Japan to move away from physical cash.
While 96% of transactions in neighboring South Korea are electronic, Japan is seeking 40% cashless transactions by 2025.
But as well as weening Japan off cash, DeCurret’s suggests the study group will address preexisting worries about cryptocurrencies. While digital payments can improve efficiency and convenience, the statement reads, “concerns are emerging over issues including privacy protection, crime prevention measures, and technology risks.”
Concerns about the safety of cryptocurrencies may not altogether be surprising. Japan experienced firsthand two of the worst ever exchange hacks – Mt. Gox and Coincheck. Exchanges now need a license from the FSA before they can operate legally in the country.
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DeCurret, which has been licensed since 2019, said that the study group will provide “the need for a direction for the realization of valuable digital currencies in Japan.”
The group will hold its first meeting in June and will meet once or twice monthly until September. It will then release a report summarizing the discussions.