Mitsubishi UFJ, Japan’s largest financial group is experimenting with blockchain technology to build its own digital currency
One of the world's largest financial groups, Mitsubishi UFJ Financial Group Inc., (MUFG) is working on its own digital currency in Japan, using blockchain technology. An MUFG spokesperson confirmed to BraveNewCoin that the program exists but the details have yet to be finalized.
One of the world’s largest financial groups, Mitsubishi UFJ Financial Group Inc., (MUFG) is working on its own digital currency in Japan, using blockchain technology. An MUFG spokesperson confirmed to BraveNewCoin that the program exists but the details have yet to be finalized.
The news first surfaced last week when one of Japan’s leading newspaper, the Asahi Shimbun, reported detailed information about how “The “MUFG coin” is expected to be available in autumn 2017 as part of the megabank’s ‘FinTech’ financial services that use information technology.”
According to Asahi Shimbun, the MUFG coin system will function like prepaid electronic money cards, much like ‘Suica,’ a rechargeable, contactless smart card used as a fare card on train lines in Japan. Launched in November 2001 as a way to pay for travel, Suica can be used at approximately 4,400 railway stations and 24,000 bus services nationwide, according to East Japan Railway Company (JR East) which issues Suica. JR East then launched the electronic money card upgrade in March 2004 allowing for payments to merchants across the country. As of March 2015, 50.7 million Suica cards have been issued.
“Suica was usable at approximately 290,000 stores, and record daily transactions for public transportation electronic money reached approximately 4.64 million as of March 31, 2015.”
- East Japan Railway Company
BraveNewCoin reached out to MUFG for confirmation of the cryptocurrency program, however, the bank has been tight-lipped on the subject. A spokesperson said that “Regarding the speculation in media reports, these reports are not based on any announcement by MUFG, and details have not been decided.” Nonetheless, the bank confirmed the existence of the project.
"However, it is true that MUFG is conducting demonstration experiments on the ‘Coin’ within the company utilizing a block chain technology."
- MUFG Spokesperson
Meanwhile, the Asahi Shimbun’s reporting carries weight. The publication claimsto be Japan’s leading newspaper since its foundation in 1879 with 18.2 million readers daily in Japan. The company reported having a total circulation of 7,612,337 copies, 99.4% of which are household subscriptions.
In February, the publication reported that the MUFG coin project commenced in the Fall of 2015. To enable deployment and use of the cryptocoins, the bank is reportedly developing an automatic teller machine that will allow users to withdraw the MUFG coins into their smartphones at a rate of one MUFG coin to one Yen. The machines are expected to be put into operation in spring 2018, according to the same source. Moreover, the bank plans to contract various vendors to accept MUFG coins for transactions.
According to polling by Pew Global Research, smartphones are flourishing across Japan but still have yet to reach half of the adult population, which is much older than the global average. Only 39 percent of Japanese adults have a smartphone so far, a little more than half of the U.S. total, according to Pew’s 2015 research. If MUFG’s cryptocoin is to be used in the way the Asahi Shimbun’s source suggests, the low percentage of smartphone users could be a constant problem in the way of mass adoption.
Accuity’s 2016 Bankers Almanacranks MUFG as Japan’s largest retail bank by assets. The MUFG Group was established in April 2001 by three banks; the Bank of Tokyo-Mitsubishi, Mitsubishi Trust Bank, and Nippon Trust Bank. The Group currently comprises the holding company, 224 consolidated subsidiaries, and 65 equity-method affiliates. The Group reported total assets of ¥298 trillion, or about US$2.8 trillion, as of March 2016.
“MUFG’s goal is to be the world’s most trusted financial group, and it is engaged primarily in the banking, trust banking and securities businesses, while also conducting business in credit cards and consumer finance, leasing, asset management and other areas.”
- MUFG 2015 annual report
Japan’s largest bank with offices throughout Japan and in 40 other countries, the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) is a consolidated subsidiary of MUFG. For the financial year ended March 31, 2016, the Group reported profits of ¥951.4 billion, 61.59 percent or ¥586.0 billion of which was BTMU’s profits.
This program is not the first time the bank has investigated using blockchain technology to enhance its business. In April, MUFG partnered with private blockchain startup Chain Inc. "to build blockchain solutions for Japan’s financial sector," Chain wrote on its blog.
The partnership started with the two companies collaborating on a blockchain proof of concept for Promissory Notes. It would enable “businesses [to] instantly and securely issue, transfer, sell and redeem Promissory Notes in a natively digital medium, with lower costs and risks for counterparties over traditional methods,” according to the startup.
In addition, Chain revealed that other areas where blockchain technology could improve payments and market infrastructure in Japan were being explored in the partnership, which includes other institutions as well.
“We are pleased to be working with Chain to explore the application of next-generation financial infrastructure that we believe could significantly enhance the experience for our clients”
— – Satoshi Murabayashi, Mitsubishi UFJ Financial Group CIO
The megabank also joined the R3 CEV consortium in September 2015. In March, MUFG was among R3’s 40 bank members which completed a trial of five cloud-based blockchain technologies. The 40 banks connected to R3-managed private distributed ledger technologies built by Chain, Eris Industries, Ethereum, IBM and Intel. Cloud computing resources were provided by Microsoft Azure, IBM Cloud, and Amazon AWS to host the distributed ledgers.
“Our clients deserve a banking experience that comes with enhanced security, low costs and minimal errors.”
Another R3 consortium member, the megabank Citi, joined at the same time as MUFG and also participated in the blockchain trial in March. Citi has also been working on its own digital currency, ‘Citicoin,’ at least within the confines of their laboratory.
In July 2015, Ken Moore, the head of Citi Innovation Labs told IBTimes that they have three different blockchains running in their labs for the sake of experimentation, plus “We also have an equivalent to bitcoin up and running, again within the labs, so we can mine what we call a ‘Citicoin’, for want of a better term,” the project leader said. The purpose of the coin, as of last July, was “to make sure we are at the leading edge of this technology and that we can exploit the opportunities within it.”
Citi has been tight-lipped about their cryptocurrency plans ever since, but with competition from MUFG, the race to offer the first ‘bank coin’ may now be rekindled.
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