The flexibility of remittance compared to bank payments is a major attraction.
Progma leads the stable coin business in Japan.
The revised Funds Settlement Act of 2023 has come into force. Do you think stablecoin will be utilised in Japan in the future? What are your thoughts on the issues and areas that could be solved by its use?
Tatsuya Saito (Saito): Firstly, there are three types of stablecoin stipulated: deposit-type, fund transfer-type and trust-type. We believe that the ‘trust type’ is easier to use.
On top of this, one of the characteristics of stablecoins is the degree of freedom of restrictions on the destination of remittances. At least with trust-type stablecoins, transfers can be made as long as the address information is available, regardless of whether the identity has been verified or not, and this has been legally sorted out.
Bank deposits, on the other hand, can only be transferred to the extent that the identity is verified and the account is open. This difference is significant. In light of this, areas with a wide range of availability, such as cross-border payments, have an advantage in using stablecoin. Stablecoin can be used to transfer money regardless of the address holder's place of residence, whether domestic or international, and this is of great value.
Another aspect is what the settlement object is. If the settlement target is an asset on the blockchain, both the asset and the funds move in the blockchain at the same time, making so-called simultaneous settlement possible. Stablecoin is the best match, as it is a white space where it can demonstrate its true value and where there are no existing competing means of settling funds.
On the other hand, the payment target may not be an asset on the blockchain. Broadly speaking, there are two types of payments: those that require programmability and those that do not.
Those that do not require programmability are those where all that is required is a physical coin, such as a vending machine. Stable coins are not required there.
The most likely example of something that requires programmability is corporate payments. In corporate payments, an invoice is first issued and the recipient accounts for it. The process from receipt of the invoice to the accounting process is already automated.
However, the process of receiving the invoice and transferring funds from the ordering party to the recipient is not automated. The contents of the invoice to the accounting process have to be output separately, and the remittance operation has to be carried out manually by logging in to the Corporate Internet Banking System (Corporate IB).
To automate payments through banks and other financial institutions, each bank used as the main bank needs to open its API for updating the system.
In fact, with the exception of a few banks, the majority of banks have only opened up their APIs for reference systems. For example, balances can be seen from a household account app, but it is not possible to send money directly from external systems other than Corporate IB. This is because it is the same as allowing updates to be made to the ‘account system’ that handles deposits and foreign exchange within the bank from an unspecified external system, and the scope of impact is so large that it is unrealistic from a profitability perspective when considering the time and costs required to deal with the issue.
Trust-type stablecoins can be moved directly from the outside, as they are issued wrapped in a trust that guarantees programmability, without direct access to bank deposits (i.e. account systems).
Therefore, it is possible to automate the entire process from receipt of invoices as an input to settlement together with the accounting process. Therefore, I think the value of stable coins can be demonstrated in corporate settlements.
