TOKYO -- Japanese banks have typically shied away from adopting virtual currencies, but not anymore. Now they are looking to leverage their huge customer bases to jump into the world of cryptocurrencies by offering quick and inexpensive services.
Bank of Tokyo-Mitsubishi UFJ earlier this month began test operations within the bank with its own cryptocurrency, dubbed MUFG coin. Users first need to download an app to their smartphone and convert money from an existing bank account. Then, they can instantly transfer money directly to another user via the app or use it to purchase goods at affiliated shops.
BTMU envisions people using the virtual currency as an alternative to cash because it is more convenient than the currently available methods to transfer money via bank accounts. Individuals could use the app to split the check after going out for drinks or for lending small amounts of money to friends. Because the currency is electronic, gaming and other online services operators can set charges at less than a single yen, the country's smallest unit of physical currency.
Bitcoin, a leading cryptocurrency, is traded through virtual exchanges. Its rate fluctuates like any other currency, often driven by speculative traders seeking to profit on the exchange market. In contrast, one MUFG coin will be fixed at 1 yen (0.89 cents).
Some 200 executives and employees at the bank's headquarters are currently testing the MUFG coins. BTMU plans to expand the trial across its branches by the end of the year.
Nobuyuki Hirano, president of Mitsubishi UFJ Financial Group, describes traditional banking systems as "solid, but slow." With the rise of virtual currencies, though, that immobility is exposing weaknesses, and banks are starting to take a fresh look at the smart money world.
The other two Japanese megabanks are also preparing to roll out their own currencies: Mizuho Financial Group has developed so-called Mizuho money jointly with IBM Japan, while Sumitomo Mitsui Banking, under Sumitomo Mitsui Financial Group, conducted trial operations of its SMFG coin in September of last year.
All aboard?
Other Japanese institutions are moving in the same direction. SBI Holdings, a financial conglomerate, last year joined hands with Ripple, an American cryptocurrency startup, to launch a consortium for building a platform of low-cost payments using blockchain technology. So far, 59 financial institutions, including regional banks and credit associations have participated in the planned transaction network.
"I didn't imagine that the consortium would have been accepted so widely," said Takafumi Okita, CEO of the joint venture, SBI Ripple Asia.
Outside of Japan, several financial service operators, such as China's Alipay, already provide smartphone-based, one-stop services, where users can make almost all payments and remittances.
Japan is late to the game. But once the country's megabanks and other institutions, with tens of millions of account holders, embrace such services they could quickly catch up with the early adopters.
There are holdouts, though. Some banks question whether the technology is safe, stable and cost effective compared to established banking systems that have been in operation for decades.
"We will have to examine whether the costs in reality will become cheaper," said a source from a bank participating in the consortium.
(Nikkei)
