Largest Bank in Japan to Conducting Trial for Own Cryptocurrency
Bank of Tokyo-Mitsubishi UFJ, the banking arm of Mitsubishi UFJ Financial Group is getting ready to test its native MUFG coin in 2019, the company has said. The project to develop the digital currency has reportedly been ongoing for years.
The trial is set to involve 100,000 of the bank’s retail customers according to NHK. This might as well be the biggest trial by any financial institution.
Customers will be roped in to install an application on their phones. This will then convert their fiat into MUFG coins which can be used to make payments and transfer money. A unit of the MUFG coin will be equivalent to one Japanese yen.
‘They will be able to use the currency to make payments at places like restaurants, convenience stores and other shops,’ a report from the bank stated. ‘They can also transfer the currency to the accounts of other participants,’ the report added. In the meantime, the bank will be conducting in-house trials with its staff.
Cut Transfer Costs
The initiative will seek to lure in users who currently use expensive electronic money platforms to make payments and remittances. The MUFG coin will reportedly cut commissions to a fraction of what is being currently levied.
“If MUFG coin is used for overseas remittances, it is estimated that the commission will be cut to less than one-tenth of that of the current cost of several thousand yen per (international) transaction,” the report says.
An ATM machine that will allow users to withdraw their MUFG coins is also reportedly in the works.
Plans for the coins were announced as early as 2015 before cryptocurrencies had even gained widespread attention. The bank confirmed the plans early 2016.
The Ripple network whose XRP coin is currently the third largest has a similar value proposition. The network is specifically targeted at financial institutions. Used with the native XRP coin, it is said to cut transaction costs by as much as 60% and by about 30% when the network is used alone.
Dozens of banks have already tested it. Santander, the largest bank in Europe by market capitalisation has recently deployed a blockchain based payment app that uses technology provided by Ripple. The app called One Pay FX has already been rolled out in four countries – the UK, Poland, Brazil and Spain.
With MUFG also rumoured to be planning a cryptocurrency exchange in the future, we can expect the coin also be traded there.
MUFG president Nobuyuki Hirano says the coin will overcome the high volatility that has characterised the cryptocurrency market. It is not however clear how this will be achieved. Ripple’s XRP coin has not been spared by the high volatility fuelled by wild speculation. Last year alone, its value went up by an astronomical 36000% becoming the best performing coin.
Its fortunes have however declined in line with the general downward trend witnessed in the first part of 2018. High volatility remains a major concern with cryptocurrencies.
Several stable coins most pegged on the US dollar already exist. Their supply is controlled to maintain their value at par with the US dollar.