Will stablecoins overcome the hurdle of widespread trade settlement? Mitsubishi UFJ Trust, Progmat, STANDAGE, and Ginco begin joint study | CoinDesk JAPAN

Mitsubishi UFJ Trust and Banking, Progmat, STANDAGE, and Ginco will begin a joint study on the use of “domestic stable coins” issued using the “Progmat Coin” platform for trade settlement.

Trade settlement, or trade finance, is currently a complex process, and there have long been hopes that blockchain technology can be used to improve work efficiency and shorten processes. In fact, from 2019 to 2020, CoinDesk JAPAN reported multiple news stories.

However, there are hurdles to the introduction of new initiatives, and it was announced that the TradeLens project, which was jointly operated by shipping giant Maersk and IBM, would end in November 2022. Japanese container shipping companies also participated in TradeLens.

Related article: Two companies, including a Japanese container shipping company, join IBM and shipping giant Maersk’s blockchain

Currently, the mainstream of trade payments is US dollar payments via banks based on SWIFT (Society for Worldwide Interbank Telecommunications). Although there is room for improvement in terms of the number of days and costs required for settlement, it is said that there are no major problems with transactions between developed countries.

So, what is the aim of this joint study?

The target is trade with emerging countries, which accounts for about 40% (approximately 110 billion yen) of the total global trade transaction (approximately 2,800 trillion yen). In trade with emerging countries, smooth US dollar settlement may be difficult due to foreign currency regulations and restrictions on the use of letters of credit.

This joint study can be said to link the trade payment system that STANDAGE has been developing since 2017 with the “Progmat Coin” platform to realize trade payments, that is, payments between international companies. By combining a blockchain-based trade settlement system with a domestically produced stablecoin, it aims to overcome the hurdle of US dollar settlement.

Progmat’s Tatsuya Saito said at the company’s establishment announcement last September that the primary target for the “domestic stablecoin” that they are considering issuing based on Progmat Coin is “trade settlement.”

Related article: Will Progmat not issue stablecoins by itself? ──Misunderstanding and unknown impact

Furthermore, according to an explanatory article he wrote in his note, it is expected that the cost will be reduced by over 60%, and the required period will be shortened by 120 to 180 days.As a result, the market size will be reduced. As for the impact, “the maximum transaction amount is expected to be around 40 trillion yen.”

The joint study aims to create the first use case within 2024.

It is believed that entertainment, represented by games, will lead the way in mass adoption of various initiatives utilizing blockchain, the so-called Web3. On the other hand, trade settlement, or trade finance, is a field that is not well known to the general public, but it is an initiative that focuses on Japan’s position as a trading nation, and its market size is large.

Stable coins are expected to appear in Japan this year, and the use of Web3 in the business field is likely to steadily advance.

｜Written and edited by Takayuki Masuda
｜Image: Shutterstock