Major Japanese banks back stablecoin platform for cross-border settlements

Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank are supporting the initiative, according to a recently published official announcement. The project is a collaborative effort between blockchain firms Datachain, Progmat, and TOKI, with expectations of global participation from financial institutions.

Project Pax aims to address inefficiencies in the $182 trillion global cross-border payments market, which faces challenges in speed, accessibility, and cost despite remaining a primary focus for financial institutions. The G20 has identified these issues alongside the need for improved transparency in international transfers.

Leveraging stablecoins

Datachain and Progmat intend to leverage stablecoins to enable fast, cost-effective, and round-the-clock cross-border transfers. The platform will utilize Swift’s existing API framework, allowing banks to instruct Progmat to settle transactions on the blockchain. This approach addresses regulatory compliance and operational setup challenges while minimizing investment costs for financial institutions.

The project comes amid growing interest in stablecoins, with the market capitalization reaching over $160 billion. However, stablecoin usage in the real economy remains limited. Project Pax seeks to change this by offering a seamless experience for businesses, similar to traditional international transfers but with the benefits of blockchain technology.

By integrating stablecoins into the international business settlement process, Project Pax seeks to overcome the limited adoption of fiat-pegged crypto for traditional business operations. The initiative aims to position stablecoins as an enterprise payment tool, potentially revolutionizing cross-border transactions for businesses worldwide.

New infrastructure options

For financial institutions, the platform offers a way to provide new transfer options to corporate clients without building entirely new infrastructure. The project will conduct pilot tests to verify and visualize the quantitative effects of using stablecoins for cross-border transfers.

Project Pax represents a bridge between traditional finance and Web3 technologies, aiming to create sustainable impact by integrating blockchain strengths into the existing economic system. The name “Pax,” meaning peace in Latin, reflects the project’s goal of improving global financial access and addressing economic disparities.

This development comes as the crypto market faces challenges, with Bitcoin’s price falling 6.5% as of September 3. Traders attribute the downtrend to statements from Bank of Japan Governor Kazuo Ueda, indicating potential interest rate hikes and rekindling fears of recession. The market’s reaction highlights the ongoing interplay between traditional finance and the crypto sector.