Japan's Second-Largest Bank, SMFG, Prepares to Launch a Stablecoin Platform

Japan's second-largest bank, Sumitomo Mitsui Financial Group (SMFG), is preparing to launch a stablecoin platform in collaboration with Ava Labs and Fireblocks.

Japan’s second-largest lender, Sumitomo Mitsui Financial Group Inc (SMFG), is launching a stablecoin platform with the assistance of Ava Labs and Fireblocks, both U.S. companies.

Ava Labs is providing blockchain infrastructure for the project, while Fireblocks will be in charge of managing digital assets and transaction security systems.

The initiative marks a significant step forward for Japan in integrating blockchain technology with its financial business.

Testing for the stablecoin platform is set to begin in the second half of 2025, with the aim of a full launch in 2026, Nikkei reports.

SMFG Partners with U.S. Firms to Launch Fiat-Backed Stablecoin

Sumitomo Mitsui Financial Group Inc is joining forces with two leading U.S. companies in the sphere of blockchain and digital asset management to launch a stablecoin backed by fiat currency. This endeavor will see Ava Labs, a recognized innovator in distributed ledger development, and Fireblocks, a firm specializing in digital asset protection and transaction security systems, collaborate with SMFG.

Further technical support will be provided by TIS Inc., a Japanese IT company, to build the technical framework for the project.

The project will enter the testing phase with a demonstration experiment in late 2025. As part of this program, the bank will examine the efficiency of stablecoin transactions for inter-company payments and assess whether they meet the market need.

Upon successful completion of this initiative, which is anticipated to transpire in 2026, SMFG aims to officially release its stablecoin.

Japan Moves Toward Advanced Financial System

In a significant move toward advanced financial system regulations, Japan is taking decisive action in the stablecoin sector. Circle, the issuer of USDC, has become the first international stablecoin company to receive approval for its operations in Japan as a stablecoin provider.

This regulatory achievement showcases Japan’s commitment to establishing professional digital currency frameworks that prioritize security. With this approval, the door is now open for additional companies to launch their projects as the country expands its stablecoin market.

The Japanese government is continually updating regulatory rules to provide greater options for stablecoin operators. Previously, stablecoins in Japan could only derive their value from demand deposits. However, a recent proposal in February proposes that issuers can use short-term government bonds and fixed-term deposits in addition to demand deposits as the collateral asset base for their stablecoins. This modification would render the stablecoins even more dependable while providing issuers with increased capability to manage their reserve assets.

Stablecoins to Boost Transaction Efficiency and Lower Costs in Japan

Despite these positive changes, Japanese regulatory bodies have also implemented specific rules to safeguard the financial stability of the market. The maximum allowed distribution for stablecoin reserve funds by issuers is 50% in government bonds or fixed-term deposits. These restrictive banking limits are set to maintain market confidence and ensure proper supervision of stablecoins for financial security.

As Japan's regulatory framework for cryptocurrencies continues to evolve, the country is reaping the benefits of innovation in stablecoin technology. The implementation of stablecoins would significantly enhance transaction efficiency, rendering it more beneficial for businesses and individuals.

These assets are capable of reducing the fees for transactions to a level lower than current banking costs. Another main advantage of blockchain transactions is the superior security they provide, which in turn ensures the transparency of transactions, rendering them tamper-proof. The promise of substantial advantages is luring international banking organizations to Japan, establishing the country as a prime location for the controlled use of digital assets.

As SMFG prepares to launch its stablecoin platform in the second half of 2025, the country is making notable progress in merging blockchain technology with its financial business infrastructure.