Mizuho Bank is set to roll out a proprietary digital currency, J Coin, in March, backed by 60 regional domestic banks. The virtual currency is the result of the development of J-Coin, announced in September 2017 by Mizuho.
The project dates back to 2018. In September, news surfaced that the consortium of banks, led by Mizuho Financial Group and Japan Post Bank, had won support from the country’s central bank and financial regulator, to launch the J Coin, an electronic currency that will be used to pay for goods and services and transfer money through smartphones.
Although the J Coin is not a Central Bank Digital Currency and its value will not be directly regulated by Japan’s central bank, it will be pegged to the yen at 1:1 and will not fluctuate on the market as virtual currencies such as bitcoin do.
Mizuho is not the only Japanese bank experimenting with its own currency. Mitsubishi UFJ Financial Group is also planning trials of its own MUFG Coin with around 100,000 account holders in Tokyo.
Much like the J Coin, the proprietary currency is pegged 1:1 to the Japanese Yen, can be downloaded to smartphones and used for P2P funds transfers and for online shopping.
Such trials of proprietary currencies allow Japanese regulators to observe the effects of digital currencies on the market, without some of the considerations of a CBDC, such as storing and exchanging the currency.
However, the technologies used to generate, store and exchange digital currencies are subject to extensive testing and regulatory scrutiny, as concerns have been raised around the security and impact on banking stability of such projects.
In regard to crypto legislation within Japan, the country’s Financial Services Agency (FSA) is considering placing cryptocurrencies into a dedicated legal category called “crypto-assets” to prevent confusion with legal tender.