Japanese lenders team up with global banks for blockchain-based digital coin

It will be used to speed up overseas money transfers.

Japan’s Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group joined their US and European peers in developing a blockchain-based digital coin that could fast track overseas money transfers and save transaction costs by cutting out intermediaries, reports Nikkei Asian Review. Both of the Japanese banks have reportedly invested about several hundred million yen each.

To be run by London-based Fnality International, which recently clinched about $63.1m in capital from 14 participating banks including MUFG, SMFG, UBS, Credit Suisse, and Barclays of Europe, the project will set up accounts at participating central banks and issue utility settlement coins (USCs). These are digital equivalents of major currencies that can be converted into their paired currencies on a one-to-one basis.

When a client sends money from Japan to the US, a Japanese bank will transfer the specified amount of yen to the country’s central bank and Fnality will then issue the equivalent amount of USCs, depositing them into an account at a specific American bank, which will then transfer the equivalent amount of dollars into the end client’s personal account.

Fnality eyes to step up negotiations with central banks and aims to issue the first USC by late 2020. The system will initially work with USD, EUR, JPY, and CND.