Despite its extremely volatile nature, cryptocurrency has managed to create a niche audience for itself. Despite risks, more and more people are willing to invest in it. This has given a sort of acceptance to the world of these virtual currencies, so far mainly driven by private crypto coins. With their rising acceptability, many central banks are now looking at them holistically and taking note of their potential. This sense of developing ‘trust' has led private institutions to lean into the new industry to see how they can capitalize on the emerging sector as soon as possible.
The latest to join the bandwagon is Japan's biggest financial institution Mitsubishi UFJ Bank. The trust arm of Mitsubishi has announced plans to launch a yen-pegged stable coin, called “Progmacoin”, in 2023.
Why now?
According to the company's announcement, reported by Nikkei first, the stable coin will be used for clearing and settlements of digital securities related to the bank. The need for Progmacoin to settle transactions in digital securities arose because the bank plans to launch a digital securities exchange in partnership with Japan's SBI Group and Daiwa Securities later this year. It wants a way to settle transactions instantly, without waiting for the bank to enter the data into the ledger at the end of the day, which is usually the case.
The blockchain technology improves on that and the transaction data is immediately entered into the ledger automatically and is visible to everyone. It also reduces the cost of transactions on the exchange.
The digital securities exchange that Mitsubishi plans to launch will compete with the Tokyo Stock Exchange.
What is a stable coin?
Cryptocurrencies that are backed by real-world assets like gold, fiat money (those issued by the government), and precious commodities are categorised as stable coins. They are less volatile when compared to popular coins such as Bitcoin, Ethereum and Dogecoin. Put simply, stable coins are a bridge between fiat currency and crypto coins. They have a valuation like fiat currency but offer utility and mobility of a cryptocurrency.
Is it a new type of cryptocurrency?
No. For instance, the planned Progmacoin is not the first stable coin. Many stable coins have been previously launched pegged to other currencies. Tether is an example of a stable coin, which is pegged to the US dollar.
Even in Japan, stable coin have been previously launched. Japan's central bank is already planning to test its yen-pegged digital currency this year. It is tentatively called "DCJPY". Then, there's the one announced by the trading firm Mitsui & Co. Known as ZipangCoin, the stable coin will be pegged to gold, instead of yen.
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