Three of Japan’s largest banks are working together and planning to test a cryptocurrency called DCJPY in 2022. Other than the large banks, approximately 70 other Japanese companies are joining the consortium that plans to launch the yen-based cryptocurrency next year, according to Reuters.
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At a news conference on Wednesday, Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group said they’ve been meeting since last year to build a shared settlement infrastructure for digital payments.
The new digital currency, dubbed “DCJPY,” will be backstopped by bank deposits and rely on a common platform to expedite large fund transfers and settlements among the participating companies, according to Kazuhiro Tokia, the chief executive of cryptocurrency exchange DeCurret.
DeCurret is leading the consortium, which includes banks Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group. The consortium also consists of Japan Post Bank Co Ltd., Nippon Telegraph and Telephone Corp, East Japan Railway Co and Kansai Electric Power Co Inc.
Within the public sector, the Bank of Japan has prioritized the development of a central bank digital currency, or CBDC, with a focus on providing seamless payment channels between the so-called digital yuan and electronic payment services. While the BOJ is spearheading this effort, the end goal is to incentivize private-sector uptake of a CBDC. As Cointelegraph reported, the Bank of Japan’s CBDC pilot tests are expected to be completed by March 2022.
The deposit-backed infrastructure being developed by the consortium aligns with the BOJ’s CBDC framework, according to DeCurret adviser Toshihide Endo, who previously served as head of Japan’s Financial Services Agency.
There are three main arguments for the projects, starting with interoperability between existing stored value mechanisms. Japan’s largest railway operator, the East Japan Railway Company, already allows holders of its “Suica” smart cards to use them to pay for items in railway stations and some smaller stores. But, as the white paper points out, such schemes aren’t interoperable. Forum members believe that a digital currency would fix that issue and allow innovation – such as allowing operators of stored value schemes to become payments players.
A second reason for the DCJPY is that by offering a digital currency issued by banks there would be no competition with bank deposits. The Forum also argues that a digital currency could speed settlements for commercial transactions and reduce cash-handling costs.
The final argument for the DCJPY is that a digital currency is the most appropriate mechanism with which to transact smart contracts, or to pay for digital assets like non-fungible tokens.
