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With the revision of the law regarding stablecoins in June 2023, the Web 3.0 field in Japan is about to reach a major turning point.
Since the law was revised, various companies and financial institutions have become more active in stablecoin-related fields, and full-scale use is expected to begin in 2024.
While there are many companies in Japan, the ones that are attracting particular attention in the stablecoin field are Progmat and JPYC.
Both companies are truly leading the way in Japan's stablecoins. This time, we set up an opportunity for a conversation between Mr. Tatsuya Saito and Mr. Noritaka Okabe, who lead these two companies, and talked about the future of both companies, the future of Japan's stable coins, and how they see Web 3.0 in 2024. received.
It is no exaggeration to say that Progmat and JPYC are the two companies whose trends are attracting the most attention in the Japanese stablecoin field, but what is the background behind their collaboration and the announcement? Please tell us what impressed you during the process.
Tatsuya Saito (hereinafter referred to as Saito): I first met Mr. Okabe at "B Dash Camp" held in Sapporo last May.
Mr. Okabe and I held a session on stable coins, and from there we had a series of opportunities to speak on stage together.
Our relationship particularly deepened when we dined together at the eve of WebX in the summer. I suggested, "Maybe we can do this together?" and we hit it off. Then, the topic of "trust-type JPYC" came up.
Since we were in a unique position to support issuers with trust and infrastructure rather than issuers themselves, we thought we might be able to collaborate.
I did think that if the reaction was lukewarm... well, there is nothing I can do (laughs). I'd felt this way since we first met in Sapporo, but Okabe-san is a very open-minded person and took a very positive approach.
Noritaka Okabe (hereinafter Okabe): From the moment I met him in Sapporo, I had the impression that Mr. Saito was from the Web3.0 side. At the time, Mr. Saito was still working for Mitsubishi UFJ Trust and Banking, so I personally was hoping that he would jump right in and start his own business (laughs).
I thought that if he jumped out, I might be able to team up with him.
However, it is difficult to issue trust-type stable coins on public chains, and there were concerns that there might be transfer restrictions in some cases.
At that time, I didn't know much about trust-type issuance, so I felt that it was a hurdle. At that time, I was talking with Mr. Saito, and when I learned that it seemed possible to issue the book flexibly, I thought, "Then there's no reason not to do it."
We currently have a 99% domestic share of stablecoins. If we do not issue a trust-type bond and another company issues it instead, our market share will suffer accordingly.
With that in mind, there was no option not to do it.
By the way, we believe in the future of public chains. Therefore, if Progma did not support public chains, I don't think the collaboration would have materialized.
Saito: When I think about it, the most memorable moment was when we talked while eating together. We started talking and things started around the summer, so I think the announcement of the collaboration was pretty quick.
Okabe: There were no particular obstacles, and things went smoothly even down to adjusting the presentation schedule.
Saito: Also, this is a personal story, but after I made Progma independent, I started posting on SNS in earnest.
I tried not to touch it when I was a banker, so I guess you could say that gave me wings of freedom (lol). We have been issuing press releases from time to time, but the background has become complicated, and sometimes it is difficult to convey our true intentions just by reading the contents of the release.
Therefore, I try to provide explanations in my own words through SNS.
The same goes for our collaboration with JPYC. From the perspective of those who watch it, I think it's a collaboration that could be confusing.
People in the existing financial industry might feel like, "Oh, so we're partnering with that company," and conversely, I think that Okabe's fans might feel like, "Are we partnering with that centralized Progmat?" (laughs)
Okabe: There must have been some people who thought, "Have we finally fallen into the hands of centralized power?" (lol)
Saito: Intuitively, I felt that unless we thoroughly explained this collaboration, there would be more negative reactions than positive. That's why I wanted to convey the story in an easy-to-understand and accurate manner, including the underlying background information.
What do you both find difficult and rewarding in advancing your business in the stablecoin field?
Okabe: This business has the potential to invade the banking system. And since we are in a position to bring about innovation, we feel a resistance to it every day.
Specifically, there is the power of ``Isn't it good for a startup to do a business that could only be done by banks in the past?'' and backlash from antisocial forces and unexpected sources can come like a projectile. is.
There's a good chance that I'll continue to encounter resistance from people I can't talk to face-to-face, so figuring out how to deal with that is extremely difficult, and on the other hand, it's also rewarding and interesting.
Another rewarding point is that stablecoins are a cutting-edge field, so I get to be involved in discussions regarding legal revisions.
I believe that the trust-type stablecoin was approved because of the hard work of Progma, and if it were not for our efforts, there is a possibility that the issuance of the fund transfer-type stablecoin would not have been approved.
It's rewarding to be able to contribute to improving the country from a private sector perspective.
Saito: There are two major problems. The first is what position we want stablecoins to have in the world.
The second point is to what extent we are looking at the stable coin business market originating from Japan.
First of all, I think the reality is that existing overseas stable coins are used by people who cannot use dollars directly to avoid the dollar and conduct dollar-based transactions.
Another possibility is that it is used as an investment product to generate profits. To be honest, I think its use as a means of payment in the real economy is still limited.
With stablecoins originating from Japan, we would like to go beyond existing limited use cases and make them function as more innovative payment solutions, and we believe that the business will not expand unless we tap into new payment markets. I am.
As it is a payment business, the ``network effect'' is strong, so the challenge is ``how much can it be used?'' No recipient will accept a payment method that only a few people use.
Especially in the case of corporate payments, for example, even if trading company A wants to use a stablecoin, if company B refuses, the story ends.
Once it gets off the ground, it will spread, but it is extremely difficult to move through the first and second stages.
Rather than changing the board all at once, you can expand your scale by creating several niche markets that serve as beachheads and connecting them.
The recently announced use of stable coins for trade settlement, mainly for transactions in emerging countries, is part of this. If the awareness that ``using stable coins is easier than using cash'' spreads, it will spread to surrounding markets.
It is difficult to create this kind of atmosphere and beachhead, but it is also rewarding.
Regarding the second market scope, I believe that it will be less meaningful if it is not completed domestically and can also be used overseas.
However, from the perspective of overseas parties, receiving stable coins made in Japan is a high hurdle.
Even if you receive a dollar-denominated stablecoin issued in Japan, it is difficult to understand how to convert it back into dollars. In this case, it is necessary to prepare an environment for exchanging money overseas.
Currently, there are places, mainly crypto asset exchange companies, where you can exchange for such legal currencies, but at least a similar environment must be created.
Currently, with Japan taking the lead, regulations are being developed to allow stable coins issued in accordance with the regulatory framework of each country to be distributed within each country.
In order for stable coins produced in Japan to be freely distributed and converted into cash in each country, it is necessary to follow these trends. Cooperation with regulatory authorities in each country is also essential for this purpose.
It wouldn't be so difficult if we were told to do this over five or 10 years, but in reality, if we don't finish it within the next two years, we won't be able to compete with overseas projects.
If this cannot be done in a short period of time, there will be a question as to why a Japanese Galapagos-style stablecoin will be used in a payment market where "network effects" are important.
Okabe: Countries have already agreed to develop regulations related to stablecoins, but it is important that Japan does not become the Galapagos.
We are funded by Circle, which issues USDC, and JPYC is basically designed to the same standards as USDC.
There is nothing good about doing things based on different standards, as it only increases costs. We believe that the basic design of each stablecoin should be unified.
What do you think the future holds for stable coins, and in turn, for finance and payments? Do you have a specific vision for what it will be like in few years?
Okabe: In one year's time, it has already been decided that Zengin-Net will be open to fund transfer companies.
Therefore, I believe that in about two years we will be able to create a world in which funds transfer type stable coins are connected to Zengin Net, and anyone who has stable coins can transfer money to any bank.
If this happens, I think stablecoins will become more popular as they can be added to existing bank payments.
Regulations need to be changed, but I think it will be possible to use it for paying in capital. Currently, exchange fees are high even when depositing funds from overseas funds.
If this can be replaced with a stablecoin, the fees will be significantly reduced. In addition, a world where salaries can be paid using stable coins may arrive in two to three years.
In fact, I have heard that several fund transfer companies have applied.
The above is what we can expect in the next few years, and ultimately the world will change to one where blockchain is used behind existing services.
For example, FX is currently traded on centralized exchanges, but I think it will become even more efficient if transactions can be done on exchanges with a higher degree of freedom.
Furthermore, I think that interbank and interbank transactions will also be democratized.
Saito: When considering payments, it is essential to consider how the transaction side is doing. In particular, trends in commercial transactions should be closely watched.
So, what will the future hold for commerce? Basically, I think on-chain will continue to move forward.
Considering the trends in the Japanese economy, the number of transactions completed within the country will shrink, and if anything, global transactions will increase.
I think a typical example of this is trade, which is currently extremely inefficient. It takes time to send cargo, and even though bills of lading are created to stabilize transactions, the bill of lading is actually arriving later than expected.This is a mysterious situation.
Some may argue that it would be better to digitize the face of the card, but there is a reason why this has not been successful for several decades.
This means that even if you try to use one centralized database, you will not be able to get approval from trading participants. To put it simply, if one company is in control, at least competitors will not participate.
So, when it comes to infrastructure that everyone can participate in, I think one candidate is a public chain. It will enable seamless commerce that can be accessed by anyone around the world without relying on a centralized operator.
As commercial transactions continue to evolve, it is inevitably best to use a method on the same network for payments, and that is stable coins.
Also, due to the relationship between fiat currency and stablecoins, it will not be completely separated from fiat currency.
Stablecoins are based on the value of fiat currencies. If the value of legal currency is represented on bills or coins, it is cash; if it is represented in bank deposit account data, it is bank deposit type money; and if it is represented in token data on a blockchain, it is stable. I'm talking about coins.
In other words, the only difference is which vessel displays the value of legal currency. The source of value, legal currency, remains unchanged.
I believe that so-called CBDC is also a new device. If it is issued by a private on-chain, it is called stablecoin, and if it is issued by a new mechanism involving a central bank (however, it does not necessarily use blockchain), it is called CBDC. It's recognition.
In particular, there is still a lot of room for improvement in interbank payments and cross-border payments, so if CBDC is used as a new infrastructure, the entire payment system, including stable coins, will become more efficient.
The topic of “Will CBDC and stablecoins coexist?” often comes up, but do you think the two will coexist?
Saito: I think they will coexist. Ideally, on-chain or cross-border commercial transaction payments would be stablecoins, and payments between financial institutions and central banks would be CBDC, and payments would flow seamlessly from upstream to downstream.
Okabe: The story would be different if CBDC were issued on a public chain, but since that is unlikely, I think demand for stable coins will arise and they will coexist.
What kind of year do you see 2024 being for the two of you?
Okabe: Last year, the law was revised, but the actual license will not be issued until the middle of 2024, so we believe that this year will be the "first year of social implementation of stablecoins."
Overall, the evolution of AI is remarkable, and related to this, all kinds of value transfer will be on-chain.
When that happens, stablecoins will definitely be used as a payment method. When evolving AIs conduct transactions with each other, it is highly unlikely that cash will be used, and we are certain that stable coins will be the means used in such cases.
I think we will see more and more examples of social implementation in this area.
Saito: I think 2024 will be the year when the fusion of financial services and blockchain-related services will progress. Up until now, I think the so-called "Web 3.0" has mainly focused on entertainment and content areas, but this year will be the year when it will seriously intersect with finance.
In terms of finance, the existence of the more core part of tokenizing securities, or so-called security tokens, is significant, and will definitely grow to a scale of 350 billion yen in 2024 alone.
I think this scale is large even on a global scale, and it is safe to say that Japan is ahead of the rest of the world in this field. With the expansion of stablecoins in payments, blockchain technology will become more widespread and integration will progress.
Depending on how you look at it, some people may think that crypto assets, which are typical of blockchain-related businesses, have been "incorporated into finance" with the approval of Bitcoin spot ETFs in the United States.
Although Bitcoin was originally designed as a P2P payment method, the current reality of crypto assets is that the purpose of holding it is likely to be for capital gains.
As a world line that coexists with the P2P world, the creation of a more reliable mechanism for those who want to earn capital gains from crypto assets is itself an evolution, and it remains to be seen whether crypto asset spot ETFs will be born in Japan as well. This is what everyone will be paying attention to.
Personally, with the lifting of the ban on domestic trust banks handling crypto assets, I believe that it is possible and should be done, since if things continue as they are, wealth will flow to overseas financial institutions.
What kind of changes do you think will occur in Japan's Web 3.0 industry and the financial industry once the distribution and use of stablecoins begins in earnest in Japan?
Okabe: I think the world outside of existing finance will expand. I think people will start using stablecoins in DAOs without using bank accounts.
I think it will become difficult to grasp this situation solely through the existing financial industry. Currently, the authorities are taking a wait-and-see approach as the scale is small, but as the scale grows, into the hundreds of billions or even trillions of yen, they will definitely be subject to the same regulations as banks.
If it reaches tens of trillions, it will have to be incorporated into existing finance, and stablecoin issuing banks may emerge.
Saito: Personally, what I hope for in ``Future of Finance x Blockchain'' is the realization of P2P finance. I believe that there are almost no examples of this being achieved with current crypto assets, and due to their complexity, they are being used by some professionals with the risk of unauthorized leakage.
I think that many people currently transact financial products through intermediaries, but I hope that in the future financial transactions will be realized through wallets between individuals.
Okabe: Regarding wallets, there is a lot of discussion about the issues surrounding their widespread use, but I think we need to talk about them based on the risk of how much money is being put into them in the first place.
Of course, no one would go to the trouble of putting a small amount of money in a safe and keeping it in a safe place, and conversely, no one would properly manage large sums of money such as 10 million yen or 100 million yen.
The point is, rather than continuing to say ``wallets are dangerous'', it is important to clarify the purpose and then use them with security etc. commensurate with the purpose, and it is important to get rid of any preconceived notions. I think.
Saito: The wallet channel (UI/screen) and the functions provided are on different layers, so we have to separate the discussion.
I think it's the functionality that ensures security, and the question of whether it's easy or difficult to use is mainly the channel side.
I think you should think about where you spend most of your time on your smartphone. For example, if you open LINE all day long, it would be better to have a wallet function within the LINE application. If you are using X (formerly Twitter), it would be a good idea to use the wallet installed in it.
I think it would be better to have more channels to choose from. Since each person has a different lifestyle, it would be convenient if the wallet could be incorporated into all channels as a function, and I think that is important for widespread use among individuals.
In addition to the stablecoin area, are there any other areas or businesses that the two of you would like to take on?
Okabe: I think that the company will move in the direction of an IPO in the future, and then become a bank. I also believe that Japan is a maritime country, and there is hope that it will succeed in the area of the "blue economy."
Therefore, we would like to help you with the flow of money. In the short term, we are focusing on DAO and hope that innovation will occur through the use of stable coins.
JPYC's mission is to "break through social dilemmas," so we would like to create innovation not limited to stablecoins.
Saito: If there is a case where there is a strong gap between Progmat and my own image, I would like to take on the challenge of realizing ``individual x entertainment x global payment''.
In the IP field, the movement to effectively use NFTs to form fan communities is becoming more and more widespread. Fan users are not only Japanese.
There are quite a few people who are fans of Japanese content, not only in Asia but also in the United States and Europe. Therefore, when attempting to exchange rights to this content globally between individuals, the question always comes up, ``How do we pay for it?''
The interesting thing about trust-type stablecoins is that anyone can become an issuer.
For example, it is possible to create a stablecoin like "Entertainment Coin" that can be used in common with various IP contents, so if we can create it from Japan, I think it will become a narrative that people overseas will use.
In fact, I think this is one of the promising use cases for stablecoins outside of trade, and it is also an interesting field in terms of realizing P2P.
Lastly, please tell us about your future aspirations.
Okabe: I would like to deliver a true stablecoin to everyone in Japan as soon as possible. That has become my top priority. We rely on your support, so we would be happy if you could share our posts on SNS.
Saito: Speaking of entertainment, I actually love One Piece and Kingdom. One Piece, in particular, has been foreshadowed for decades and is now being recovered at an alarming rate, but the same thing is about to happen with stablecoins in a shorter period of time.
At the beginning of One Piece, not many people would have thought that the story would be this epic. Even with stable coins, many hints will be recovered over the next five years or so.
We also just made Progma an independent ship, so it's close to the original One Piece. So, if you participate now, there are plenty of opportunities to become a one-of-a-kind presence like"Zoro" or "Nami."
If you are interested in this area or us, please feel free to contact us.
◉Tatsuya Saito
Founder and CEO of Progmat Co., Ltd.
In 2010, joined Mitsubishi UFJ Trust and Banking. After working in corporate sales, business planning, and IT planning, he established the FinTech Promotion Office in 2016 and became the first full-time person in charge of planning and promoting Mitsubishi UFJ Trust and Banking's digital strategy. As “serial intrapreneurs,” many organizations have joined the information bank platform “Dprime,” the digital securities platform “Progmat,” the stable coin platform “Progmat Coin,” the functional NFT platform “Progmat UT,” and many others. We will launch a “Digital Asset Co-Creation Consortium” etc. In 2022, the company announced that it would turn its digital asset infrastructure business into an independent company through investment from multiple financial institutions, exchanges, and software companies, and assumed the position of representative from its founding in October 2023. 8 patents registered.
◉Noritaka Okabe
JPYC Co., Ltd. Representative Director
Representative director of JPYC Co., Ltd., one of Japan's leading stable coin companies. Utilizing his experience as a CTO and CFO, he is good at the border areas of technology, finance, and innovation law. With the mission of ``breaking through social dilemmas'', we aim to seamlessly connect Web3 and the real world with the Japanese yen stable coin JPYC, and create a society that can promote safe and free economic activities.
Progma leads the stable coin business in Japan│Tatsuya Saito, Mitsubishi UFJ Trust and Banking
The next outlook for stablecoin JPYC│Interview with Noritaka Okabe, JPYC Co., Ltd.
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