Sumitomo Mitsui Financial Group (SMBC), a leading financial institution in Japan, has joined the growing trend among major banks to explore stablecoins, as the market for this $230 billion asset class gains momentum alongside evolving global regulations.
The banking organization has established a partnership with Avalanche blockchain developer Ava Labs, digital asset security specialist Fireblocks, and IT service provider TIS to investigate the commercialization of stablecoins within Japan, as indicated in a recent press announcement.
This collaboration aims to develop a framework for the issuance and circulation of stablecoins, assess regulatory requirements, and identify potential applications. A primary focus will be on utilizing stablecoins for the settlement of tokenized financial assets and real-world assets (RWA), including government bonds, corporate debts, and real estate. However, the specific timeline for any commercial launch remains unclear.
Stablecoins, which are cryptocurrencies tied to fiat currencies such as the Japanese yen or U.S. dollar, are a rapidly expanding segment of the crypto landscape, increasing nearly 50% to $228 billion in the past year. They play a crucial role in digital asset markets globally and are becoming increasingly favored for remittances and payments as a quicker and more cost-effective alternative to conventional banking methods. A variety of players, from global asset management firm Fidelity Investments to the state of Wyoming in the U.S., are actively seeking to enter this market.
Explore further: CoinDesk Weekly Recap: Stablecoins in Focus
Japan has been a frontrunner in establishing regulations for stablecoins, officially classifying them as electronic payment instruments in 2023 via an updated Payment Services Act. Notably, stablecoin provider Circle recently introduced its $58 billion USDC token in collaboration with SBI Holdings’ subsidiary in Japan, following regulatory approval.
Previously, SMBC has engaged with digital asset initiatives, including launching a digital asset custodian in 2022 and conducting tests for security token issuance with the asset tokenization company Securitize in 2021.