Japanese banks get ready to embrace crypto as they prepare to test digital currency

Karthik Subramanian

A consortium of 74 banks in Japan have decided to pilot a project that will use digital currency for managing a lot of their operations and this will be a part of what is called a private sector yen where the digital currency will be used as normal currency in as many banking operations as possible.

We are looking at situations around the world where many banks, either individually or in alignment with other banks are looking to come out with their versions of stablecoins or digital currency to make their operations easier, provide better services to the user, cut down costs, and also stay on top of the technological advancements around the world.

Banks Facing Increasing Pressure from Startups

The banks are facing increasing competition for many of the services offered by them from various startups and other related financial services firms and this has placed them under a lot of pressure to come up with various innovations to stay relevant in these times.

If the traditional banks do not buck up and get to speed, it is quite likely that they would be left behind in the race and their customers would leave them in favor of other financial firms that are more in tune with the times. This is one of the major reasons why we are seeing banks looking to embrace crypto, wherever possible, or digital assets, and these digital currencies would be backed up by the cash that is held by the bank.

Compatible with the CBDC

Some of the banks and financial groups involved in this testing include Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group, and the project is named Digital Currency JPY (DCJPY) project. The banks and the financial firms would be using a shared platform and testing out both the retail and the corporate features of the solution to enable transfers and other functions and see how the system responds. It is also reported that the solution would be ready for the CBDC from the central bank which is also currently in the works and is expected to be released in the future. It does not specify how the various digital currencies are going to interact with each other over time and that is likely to be the biggest challenge that the banks are going to face when they look to launch this solution live.

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