The Mitsubishi UFJ Financial Group (MUFG) is reportedly planning to turn a majority-owned credit card unit into a wholly-owned hub for managing digital currencies.
According to a Nikkei report, Japanese megabank MUFG is set to position a major credit card unit into a hub for digital currencies and payments in preparation for a societal shift to cashless payments through digital currencies and digital wallets.
MUFG holds an 85% stake in major Japanese credit card issuer Mitsubishi UFJ Nicos, with the remaining 15% owned by Norinchukin Bank, a Tokyo-based bank that primarily services agricultural cooperatives. According to the report, MUFG will pay ‘tens of billions of yen” (10 billion yen is approximately USD$88 million) for Norinchukin Bank’s share in a transaction that is expected to occur this year.
Join CCN for $9.99 per month and get an ad-free version of CCN including discounts for future events and services. Support our journalists today. Click here to sign up.
Why is Japan’s largest bank making this move? The company saw reason to establish a dedicated company to handle payment platforms, specifically cashless payments driven by digital wallets and virtual currencies as they become popular in Japan, according to a company official cited by the publication.
An excerpt from the report read:
MUFG expects Nicos to manage the core system when virtual currencies take root widely.
The marked move by large banks and companies into the digital currency market comes during a boom in bitcoin awareness and adoption that will see up to 260,000 stores accept the cryptocurrency this year amid friendlier regulation. Japanese authorities are expected to receive up to 18 applications from companies to acquire licenses for operating digital currency exchanges. 10 out of those 18 are new applicants and companies looking to carve an entry into the digital currency space. One of those applicants, Japanese internet services giant GMO, is launching a bitcoin exchange in the coming weeks. Japan is the world’s largest trading market for bitcoin.
Notably, MUFG, as well as Mizuho and SMBC, three of Japan’s ‘megabanks’ are all investors in Tokyo-based bitFlyer, Japan’s largest bitcoin exchange. MUFG is also an investor in San Francisco-based bitcoin exchange Coinbase.
MUFG could soon lay claim to becoming the first major bank in the world to issue its own digital currency, ‘MUFG coin’. Expected to see a commercial rollout later this year, MUFG has already started issuing the MUFG coins internally to employees. The banking giant began development of the proprietary digital currency as early as 2015.
The value of a single MUFG coin is equivalent to one Japanese yen and the bank is aiming for currency conversions between the fiat yen and foreign currencies using MUFG coins at lower costs for users. While details are scarce, the Japanese megabank is also developing MUFG coin to be used for remittance using blockchain technology, bringing significant cost savings.
In March 2017, MUFG entered a significant partnership with FinTech payments firm Ripple, joining its ‘Global Payments Steering Group.’ It could be inferred that MUFG intends to use the Ripple blockchain for domestic and international remittances using MUFG Coin, although this cannot be confirmed at this time.
In a breakthrough this year, 47 Japanese banks completed a domestic money transfer pilot using Ripple’s blockchain.
Featured image from Shutterstock.