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MUFG Launching a Digital Currency in 2020

Digital currency

July 28, 2020 | 

1443 Views | 

JOHN K MWANIKI | 

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Japan's largest financial institution, MUFG, plans to launch its own digital currency. MUFG is not only the largest bank in the country, but it is also the world's fourth-largest bank. The group has been hesitant in the past about the idea of cryptos. So, the latest news seems to have clashed with the initial statement issued at the end of last year. 

But MUFG is now clear about its resolve to release its own cryptocurrency. The company president Hironori Kamezawa confirmed that the launch will be this year. He hinted that the company will release the currency in the second half of 2020.

The statement further stated that they will partner with the Recruit Group. This partnership started towards the end of last year. That was also the time the gossip about digital currency gained momentum. According to the partnership, the new currency will be acceptable in all Recruit's shops. 

MUFG Cryptocurrency will be Usable in Over 1 Million Outlets 

Recruit Group has an expansive list of stores in various parts of the world. Its 1 million-plus member stores could benefit the new digital currency. Actually, digital money has been in their strategy. The issue was that the Covid-19 pandemic delayed its implementation.

The pandemic could also be an accelerator of digital money adoption. Physical money and physical contact have been an issue in recent days. Now that there is a possibility of a second wave of the virus, the convenience of such tokens might prove its value. 

Industry stakeholders believe that the launch will increase crypto adoption. The participation of MUFG could be a sign of acceptance of cryptos in mainstream finance. 

Part of the upcoming digital currency launch is also the set up of mobile retail payment points. It will happen on all Recruits Group members' outlets. According to the president, the MUFG token can is open to the general public. This means that holders can use the new currency in non-Recruit stores. 

MUFG plans to announce several other partnerships after the launch. The company expects other businesses to adopt MUFG tokens through customization. These partners can brand the token with their logos and company name.

The crypto community refers to these currencies as coloured coins. This arrangement will allow for the connection of the customer base into the same system.

MUFG strategy is to connect major economic zones into the same infrastructure. According to the company, this will attract more users into the MUFG coin. This is something that most coins have failed to leverage.

In fact, the MUFG team believes that crypto wallets may replace physical wallets. In other words, it will allow users to store all their payment methods on a single device. 

The MUFG statement stated that its Coin and Wallet will reflect the future. But industry analysts are wondering how MUFG will enter markets that others failed. According to these experts, larger crypto exchanges focus more on stablecoins.

So, they wonder how MUFG, a fiat-based organization, would distinguish its token. In a quick response, MUFG mentioned that they would position the coin operations as exchange transactions. This is what the Bank Act stipulates. 

Besides this, the firm is keen on distancing their new currency from unstable cryptos. Most of them tend to have speculative significance. Part of the strategy to penetrate the market is to include a global payment system.

But what is not clear is if the MUFG coin will run at the same time as the Global Open Network. 

The GO-NET project's main goal is to create an open payment platform. The owner of the initiative, Akamai Technologies, will offer security and infrastructure. This will support the anticipated massive MUFG coin adoption

MUFG vs Japanese Yen

The MUFG will peg its stablecoin 1:1 to the Yen. The blockchain-based project was first mooted about a half a decade ago. But it seems the company has been shelving plans or delaying the rollout for unknown reasons.

Its first attempt to launch MUFG token was in 2018, but the firm postponed it to 2019, which never happened till now. 

The MUFG was set to be the pioneer amongst its peers to launch a digital currency. Last year, the group participated in a $14 million Coinbase-backed investment. The token issuance was also graced by significant Nomura Holdings and Banco Santander

Talks about Building a Digital Payment System

Early this year, there was intense competition in the Japanese digital currency space. For the most part, the economy is still cash-driven. So, most of the players were looking to cash on Tokyo Olympics visitors who prefer digital cash. 

Not long ago, Japan's biggest banks mentioned that they would take part in a study group. The participants include Sumitomo Mitsui Financial Group, MUFG, and Mizuho Financial Group. The group will assess the feasibility of developing a national digital currency solution.

The three biggest banks control a combined total of over $6.6 trillion in assets. 

The study group will also include other significant players in different sectors. This includes East Japan Railway Company and Telco giant KDDI Corporation. Also included in the group are regulatory authorities FSA and Bank of Japan (BOJ).

Representatives from the relevant government departments like Finance will also give their views. The coordinator, DeCurret, said that members will identify and discuss various crypto complexities. There are several issues surrounding digital settlement infrastructure and cryptocurrencies. 

Japan is looking to do away with physical cash systems by 2025. So, a digital payment system shared by stakeholders will speed up the process. This will only happen when big businesses, financial institutions, and regulators converge.

Neighbouring South Korea transact through electronic means in almost 96% of the time. 

Some stakeholders view digital payments as a means to improve efficiency. But there are many unresolved concerns about cryptos. Most of the preexisting worries are technology risks, privacy protection, and crime prevention.

These concerns are actually not surprising. Japan has suffered some of the worst crypto cybercrime in the recent past. Two exchanges, Coincheck and Mt. Gox, were the victim of the latest fraud. That is why FSA is now demanding that all exchanges must have a license before they can operate in Japan.
 

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