Soramitsu is working with Japan's Mitsubishi UFJ Trust and Banking and other partners to create the necessary infrastructure. The first step will be to establish a Japanese exchange for stablecoins. If a consumer in Thailand wanted to make a QR code-based payment to buy something from a Japanese e-commerce site, for example, the payment would be sent to the exchange as a dollar-denominated Bakong and converted to a yen-denominated stablecoin.
At first blush, we are a bit skeptical about this initiative. First, while Soramitsu is working on a CBDC project in neighboring Laos, none of the other countries it wants to link up has the company’s payments infrastructure. That could pose interoperability issues. Second, while Japan and Singapore have freshly minted stablecoin regulation, most Asian countries do not, which could hinder the development of a cross-border payments network that requires stablecoins to function. Third, regulatory issues aside, exchanging stablecoins issued on different blockchains requires technology to execute transactions on multiple blockchains simultaneously. It is unclear how seamless that process would be in this case.
In theory, the business case for the project is sound. Soramtisu and its partners, which thus far includes Tokyo-based digital services company Vivit and the Tama University Center for Rule-making Strategies, hopes to use CBDCs and stablecoins for connecting Japanese SMEs directly with individuals and businesses in Southeast Asia. Japan has a significant business footprint in the region as is, and its megabanks have been investing heavily in fintechs and other digital services providers throughout the region.
However, if stablecoins are going to be a centerpiece of the payments infrastructure, more comprehensive related regulation will be essential for the project to have a reasonable chance of success. Achieving the necessary regulatory harmony could prove challenging as well. Just look at the attempt to create a QR code-based payments system in Southeast Asia now, which is proving challenging even with the central bankers’ support.