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MHFG to Join Mitsubishi's (MUFG) Stablecoin Issuance Platform

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Mitsubishi UFJ Financial Group, Inc.’s (MUFG - Free Report) stablecoin issuance platform, which remains under development, will be joined by one of Japan's major banks, Mizuho Financial Group (“MHFG”), per a Nikkei article. Mitsubishi UFJ Trust and Banking Corporation is leading the development of this platform, which is expected to be established in early 2024.  

The new stablecoin platform, capable of instantly settling cross-border transactions at no cost, is expected to provide an alternative to the costly and time-consuming conventional trade finance network.

MUFG aims to establish a company, named Progmat, next month in partnership with major Japanese banks, namely, Japan Exchange Group and NTT Data. Progmat, headquartered in Tokyo, will be operating this new cryptocurrency network.

Stablecoins reduce the risk of failures as they are based on blockchain technology where payments and order deliveries can be recorded in a secure and decentralized manner. Hence, it can be used in trade settlement.

Business clients can use stablecoin issued by financial institutions denominated in yen or dollars, which are backed by legal currency deposits. When they trade with U.S. companies, they can send funds through blockchain network.

Financial groups are eyeing using stablecoin for settlements to avoid paying any remittance fees. Currently, most overseas remittances are done through SWIFT (Society for Worldwide Interbank Financial Telecommunication), which takes more than two business days to complete. Moreover, the fee for transferring dollars abroad is about 10%, which increases the trade cost.

Thus, to get rid of remittance charges, legal currency is deposited and exchanged for stablecoin. The fee structure to be charged by banks for this service is still under discussion.

MUFG’s shares have gained 14.7% on the NYSE over the past six months compared with the industry’s growth of 0.6%.

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Currently, MUFG carries a Zacks Rank #4 (Sell).

Stocks to Consider

A couple of better-ranked stocks from the same industry are BBVA USA Bancshares, Inc. (BBVA - Free Report) and HSBC Holdings (HSBC - Free Report) .

BBVA’s current-year earnings estimate has been revised 4.4% upward over the past 30 days. BBVA’s shares have gained 5.3% over the past three months. The stock currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for HSBC’s current-year earnings has been revised 3.7% upward over the past 30 days. Over the past three months, HSBC’s share price has decreased 3.8%. The stock currently sports a Zacks Rank #1.

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