The major Japanese financial institution, Sumitomo Mitsui Financial Group, has revealed its intention to introduce a fiat-backed stablecoin on the Avalanche network in partnership with Ava Labs, a US-based company, and blockchain service provider Fireblocks.
This initiative, which is currently in the development stage, seeks to enhance cross-border payments by decreasing the dependence on conventional intermediaries like the SWIFT system, as reported by local media sources.
Initial testing will focus on intercompany transactions, set to begin in the latter half of 2025, and a broader rollout is expected the following year.
Ava Labs will spearhead the blockchain development for the stablecoin’s framework, while Fireblocks will oversee the issuance, security, and management of the tokens. Additionally, the Japanese IT firm TIS will assist with the technical development during the pilot period.
Japan’s Expanding Digital Initiatives
SMFG serves as the parent organization for Japan’s second-largest financial institution, Sumitomo Mitsui Banking Corporation (SMBC), which holds around $1.7 trillion in assets.
Over the past few years, the bank has progressively increased its engagement with blockchain technology. In 2022, it co-founded the Token Business Lab with HashPort to investigate enterprise applications for NFTs, including trials involving non-transferable identity tokens.
In 2023, SMBC joined other major banks in Japan—Mitsubishi UFJ and Mizuho—in a pilot project aimed at exploring stablecoin applications for international payments.
Japan’s regulatory framework for stablecoins is among the most advanced in the world, with legislation enacted in 2022 officially categorizing fiat-backed stablecoins as “Electronic Payment Instruments,” thereby limiting their issuance to regulated banks and licensed financial institutions.
Currently, regulators are considering additional reforms that could bring digital assets under securities law, which would enhance protections against insider trading.
Increased Traditional Finance Interest in Stablecoins
On a global scale, conventional finance entities are demonstrating heightened interest in stablecoin adoption, with numerous prominent financial institutions contemplating the launch of their own stablecoins.
In the United States, regulatory momentum is gaining traction, particularly after recent calls from President Donald Trump for clearer regulations regarding dollar-pegged tokens. Bank of America has also indicated interest in entering the stablecoin space, subject to regulatory approval.
Despite increasing global adoption, the stablecoin sector has continued to expand exponentially, boasting a current market capitalization of $234.6 billion, a 56% increase over the past year.
If successful, SMBC’s project could elevate Japan to a leading position in the realm of institutional stablecoin issuance, while exemplifying the growing intersection between traditional banking systems and blockchain technology.
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