Global: Japanese Banks Test Stablecoin-Based Cross-Border Payments

In response to the growing cross-border transfer market, which reached $182 trillion in 2022, Japanese banks are piloting a stablecoin-based system to address key challenges identified by the G20, including cost, speed, access, and transparency.

The initiative is being conducted in partnership with digital asset infrastructure startup Progmat and blockchain firm Datachain, with the aim of exploring whether stablecoins can offer a solution to these issues.

The project, known as “Project Pax,” will use stablecoins and blockchain technology to facilitate cross-border transfers, bypassing traditional correspondent banking systems. However, the platform will still utilize Swift’s existing API framework, allowing banks to instruct Progmat to settle transactions on blockchain networks.

According to participants, maintaining Swift and traditional banks in the process is essential for addressing real-world considerations such as anti-money laundering (AML), countering the financing of terrorism (CFT), regulatory compliance, and the operational complexities businesses face when using digital wallets.

The pilot program is expected to launch soon, with plans to expand to more countries and financial institutions ahead of a potential commercial rollout next year.