A digital asset firm based in Hong Kong, IDA Finance, is collaborating with the Japanese banking group Progmat and other entities to create a stablecoin remittance service that will facilitate transactions between the two regions.
As per a latest announcement, IDA and Progmat Inc will join forces with the Japanese blockchain organization Datachain and cross-chain service provider TOKI to establish a proof-of-concept (PoC) that facilitates stablecoin cross-border transactions between Hong Kong and Japan.
The PoC aims to offer traders an alternative for export-import dealings between the two regions through the use of blockchain technology. It will also explore potential enhancements and advantages that could be added to existing trade routes, along with addressing regulatory and compliance factors.
The utilization of stablecoins for international payments, particularly in commodity exchanges, is regarded as highly advantageous. Transactions made using stablecoins typically process faster than standard credit transfers and can confirm payments within seconds.
IDA, Progmat, Datachain, and TOKI intend to conduct a user test where a cross-border payment request will be made using stablecoins pegged to the Japanese yen and the Hong Kong dollar via local off-ramp partners.
IDA will ensure a 1:1 reserve backing for the stablecoins, while Progmat will oversee the issuance of the stablecoins and operate the Progmat Coin platform. Datachain will be responsible for the development and deployment of the technology necessary for cross-border stablecoin exchanges, while TOKI will contribute its cross-chain expertise to the initiative.
Sean Lee, Co-Founder of IDA, referenced data from the Hong Kong Trade Development Council’s 2023 statistics, indicating that Japan stands as Hong Kong’s fifth largest trading partner.
“With stablecoins emerging as a practical alternative to traditional remittance systems and more regulatory clarity on stablecoins from both regions, there’s a tremendous potential for expansion in this sector,” Lee remarked in his statement.
Recently, both Hong Kong and Japan have been advocating for enhanced stablecoin regulations to promote increased adoption. Christopher Hui, Hong Kong’s Financial Services Secretary, stated that the region is concentrating on tokenization and stablecoins as part of its efforts to evolve into a cryptocurrency hub. Hui also presented a stablecoin bill to the legislative council in December 2024.
On the other hand, lawmakers in Japan are advancing a crypto reform bill that would permit stablecoins to be backed by short-term government bonds and fixed-term deposits with a cap of 50%. The bill has already been submitted to the National Diet after receiving approval from Japan’s Cabinet.