The banks will utilize Progmat’s stablecoin platform for this trial, as it adheres to legal regulations.
Japan’s top three banks—Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Financial Group—have announced their collaboration to launch a stablecoin platform for international settlements.
The latest development aims to revolutionize cross-border transactions and bring greater efficiency and transparency to international trade.
In 2022, cross-border transfers totaled $182 trillion, prompting the G20 to highlight four key challenges—cost, speed, accessibility, and transparency—that could be significantly addressed using stablecoins for international settlements.
Project Pax Testing Initiative
According to the press release “Project Pax,” the pilot test will involve three blockchain firms: Progmat, Datachain, and TOKI. This collaborative initiative aims to develop a cross-border stablecoin transfer platform.
The press release noted that the banks will utilize Progmat’s stablecoin platform for this trial, as it adheres to legal regulations. Additionally, the platform’s stablecoins comply with accounting and tax regulatory standards.
Project Pax will leverage Swift’s API framework, enabling banks to direct Progmat for blockchain-based settlements. According to the announcement, the approach tackles challenges related to AML/CFT, regulatory compliance, and operational setup while also considering the complexities businesses encounter when using digital wallets.
“This enables financial institutions to avoid operational redundancy with fiat currency transfers and minimize investment costs,” Datachain said in the report.
Commercialization to Commence in 2025
The pilot test will start soon with a prototype to broaden collaboration with additional countries and financial institutions. The objective is to commercialize the platform by 2025.
Datachain stated that as it advances toward commercialization, it plans to steadily grow the number of participating financial institutions and broaden the target regions, aiming to establish a global standard for international payment networks powered by stablecoins.
If successful, the initiative is anticipated to significantly grow the stablecoin market as it becomes integrated into the global economy. Datachain estimates the stablecoin market could surpass $2.8 trillion by 2028.
The report also noted that as of 2022, the cross-border transfer market had grown to a massive $182 trillion. The G20 has also established goals to be met by 2027 in four critical areas: cost, speed, access, and transparency, marking these improvements as a top priority on the global agenda.
Meanwhile, with the advanced stablecoin regulations in Japan, it is anticipated that stablecoin issuance and use in the real economy, adhering to these regulations, will commence by the end of 2024.
