Major Japanese banks support stablecoin platform for cross-border settlements

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Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank are supporting the initiative, according to an official announcement published recently. The project is a collaborative effort between blockchain firms Datachain, Progmat and TOKI, with expectations of global participation from financial institutions.

The Pax project aims to address inefficiencies in the $182 trillion global cross-border payments market, which faces speed, accessibility and cost challenges despite remaining a prime focus for financial institutions. The G20 identified these issues alongside the need for improved transparency in international transfers.

Using stablecoins

Datachain and Progmat plan to use stablecoins to enable fast, cost-effective and round-the-clock cross-border transfers. The platform will use Swift’s existing API framework, allowing banks to instruct Progmat to settle transactions on the blockchain. This approach addresses regulatory compliance and operational setup challenges while reducing investment costs for financial institutions.

The project comes amid growing interest in stablecoins, with their market capitalization reaching over $160 billion. However, the use of stablecoins in the real economy remains limited. The Pax project seeks to change this by providing a seamless business experience similar to traditional international transfers, but with the benefits of blockchain technology.

By integrating stablecoins into the international business settlement process, Project Pax seeks to overcome the limited adoption of fiat-pegged cryptocurrency for traditional business operations. The initiative aims to position stablecoins as a payment tool for businesses, potentially revolutionizing cross-border transactions for companies around the world.

New infrastructure options

For financial institutions, the platform provides a way to offer new transfer options to corporate customers without building an entirely new infrastructure. The project will conduct pilot tests to verify and visualize the quantitative effects of using stablecoins for cross-border transfers.

The Pax project is a bridge between traditional finance and Web3 technologies, aiming to create a sustainable impact by integrating blockchain strengths into the existing economic system. The name “Pax” ie peace in Latin, reflects the project’s goal of improving global financial access and addressing economic disparities.

This development comes as the crypto market faces challenges, with the price of Bitcoin falling 6.5% since September 3rd. Traders attributed the downtrend to statements by Bank of Japan Governor Kazuo Ueda that hinted at potential interest rate hikes and reignited recession fears. The market reaction highlights the ongoing interaction between traditional finance and the crypto sector.

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