Three Japanese banks start stablecoin experiment

Three Japanese banks are to experiment with stablecoin payments as they work to implement a system that meets legal requirements, according to a Thursday press release.

Tokyo Kiraboshi Financial Group, Minna no Bank and The Shikoku Bank will use a system developed by GU Technologies, a Web3 infrastructure company, on the Japan Open Chain, a public blockchain fully compatible with Ethereum that complies with Japanese law.

"We will conduct an experiment to confirm that each bank can issue its own stablecoin that can be used in Ethereum wallets such as MetaMask while complying with the Payment Services Act," the companies said.

Japan has been moving toward allowing stablecoins. Following the collapse of multibillion-dollar algorithmic stablecoin issuer Terra in 2022, parliament passed a set of stablecoin-specific rules focused on investor protection. The government also plans to allow stablecoins issued outside the country to be listed on local exchanges. Additionally, new rules to be implemented in June will allow Japanese exchanges to apply for a special license to trade stablecoins.

The proof-of-concept for the issuance of stablecoins "backed by assets" through demonstration experiments involving local governments and private companies has already begun, according to the announcement.