The First Bank of Toyama is said to be experimenting with its own stablecoin backed on a 1-to-1 ratio with the Japanese Yen, though full details have yet to be released. The Japanese bank has a market capitalization of nearly USD 26 Billion and was established in 1944.
Multiple Japanese institutions launching stablecoins
The new coin is to be called the First Bank Coin (FBC), and it is expected to be commercially available in October 2019. The token will allow merchants and consumers access to fee-free remittances and payment options. Stores in the bank’s headquarters will accept payments in FBC.
The First Bank of Toyama is not the first Japanese bank to consider launching a stablecoin. Mitsubishi UFJ Financial Group, the largest Japanese bank, is in the final stages of its own stablecoin experimentation. The bank currently has an unmanned store at its headquarters where employers can buy goods using the MUFG stablecoin. GMO Internet has also launched their own stablecoin project.
The Japanese Financial Services Agency (FSA) has recently announced that stablecoins are not considered to be a form of cryptocurrency, which is likely to encourage more financial companies to launch their own. The FSA declared that –
“In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ due to the Payment Services Act.”
What is the point of stablecoins?
A stablecoin serves a variety of purposes. A stablecoin will have reserves equal to the amount of the total token circulation, and these reserves will be held in a bank account. In this way, traders can know that they can redeem their stablecoins for cash (most stablecoins are linked to USD or EUR). There are also algorithmic and unbacked stablecoins with no reserves, though these are untested and unproven.
Given how volatile cryptocurrency prices can be, stablecoins provide an easy exit option for traders and investors. An investor may want to lock in the profit on BTC, but selling often costs a lot of money in fees. The BTC can be more easily transferred to a stablecoin such as Tether, which can be likened to a form of crypto dollars. Tether is one of the most prominent and controversial stablecoins, though it has regained its parity with the USD after much criticism.
The main purpose of stablecoins is that they remove the volatility associated with cryptocurrency, which can rise or fall 20% in a single day. However, many have stated that they do not have any value of themselves, and are just another means for centralized parties to reclaim power. Stablecoins require a third party in terms of audits, and reserves will be kept in a bank or financial solution, which is similar to how fiat money operates. The dangers of this kind of setup have already been revealed with the Tether controversy.
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