Japan’s largest banks—MUFG, SMBC, and Mizuho—plan to use a stablecoin-based system to facilitate cross-border payments in the future. The initiative, known as Project Pax, replaces correspondent banks with blockchain technology, linking it to SWIFT to allow users to initiate payments conventionally using traditional banking rails.
Japanese Banks Seek to Eliminate Intermediaries with Blockchain-Based Stablecoin System
Traditional financial institutions are starting to appreciate the benefits of blockchain systems and are building frameworks that integrate this technology with legacy transactional rails. Japan’s largest banks—MUFG, SMBC, and Mizuho—are aiming to eliminate correspondent banks, a key figure in completing international payments, in favor of a blockchain-based stablecoin system.
The three banks are involved in Project Pax, a cross-border payment platform that enables users to complete international settlements using conventional banking tools, while the blockchain element operates behind the scenes.
The platform will integrate with SWIFT, the standard messaging system for international payments, making it so users won’t realize they are using stablecoins for their transactions.
The goal is to accelerate the completion of these payments and provide the ability to send them 24/7, leveraging the stability and efficiency of stablecoins.
Pax will be based on Progmat, a tokenization network developed by MUFG with support from Mizuho, SMBC, and other institutions. Progmat is also part of a recently announced joint venture with DMM Group, a Japanese entertainment giant, to mint its licensed stablecoin.
While no launch dates have been announced for the platform, the Pax consortium expects to start testing a functional prototype with minimal functionality soon. The leading banks are also looking to partner with other international and national institutions to launch this platform in 2025.
The acceptance and use of stablecoins in Japan have grown exponentially following the passage of a stablecoin law in 2022, which allowed licensed banks to issue stablecoins linked to the Japanese yen or other legal tender.