A recent spokesman for Mizuho Bank of Japan said that the bank's stable currency, J-Coin, which is 1:1 linked to the yen, is neither an encrypted digital asset (crypto) nor a blockchain. This is very confusing. The stable currency issued by Mizuho Bank is based on what technology is underlying support?
The bank card-based payment process is actually a billing model. There is a bank clearing institution between the banks of the two parties to guarantee the smooth completion of this payment. In other words, the clearing house guarantees that the payer's bank account has sufficient balance to make the payment. At the time of payment, the clearing house first records the account, and the relevant bank then settles the cash between each other based on the accounting of the clearing house. This system of clearing houses is a centralized computing model.
The bitcoin-based payment process is a payment-settled process. That is to say, when the payment occurs, Bitcoin also performs real-time transfer in the accounts of both parties. The underlying technology that supports this process is the blockchain technology, also known as distributed accounting technology.
- Shock! No one in Japan uses Bitcoin! | 8 Questions
- Japan's Financial Services Agency: Crypto investment vehicles are not investment trusts
There are usually two ways to issue stable coins in the market. One is based on tokens and the other is account based. Corresponding to the form of currency, the stable currency issued in the first way is usually the commodity currency, and the stable currency issued in the second way is usually the credit currency. Corresponding to the issuer of the currency, the first approach is usually adopted by competitive institutions in the market, and the second is usually adopted by various central banks. In the future world of digital assets, I believe that two types of digital stable coins will coexist (see my article, predicting the direction of stable currency from monetary theory ).
At present, the mainstream stable currency issuance methods in the US market are based on the collateralization of the legal currency, the Ethereum ERC20 standard, and the issuance based on the certificate. This is true for GUSD, USDC and TUSD. However, Mizuho Bank's stable currency is not based on encrypted digital assets, that is to say not based on the pass, and not based on blockchain technology, then its issuance method is likely to be an account-based distribution.
If Mizuho Bank's stable currency is not based on blockchain technology, but this new payment method is better than the existing centralized clearing system, then it is estimated that the underlying clearing and settlement system it uses is more like a distributed Database. Then it is probably the Corda that uses R3. Corda is not really blockchain technology for full-node accounting, but it also supports direct clearing between peers. Therefore, Mizuho Bank is likely to use Corda of R3, and therefore adopts the mode of settlement after clearing first.
Interestingly, as early as 2017, Japan's three major banks, Mizuho Bank, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Bank, tried to unite and jointly issue a digital stable currency based on blockchain technology. The three banks also adopted a way of cooperating with Fujitsu, a technology company. The consortium also conducted tests in 2018. But obviously, they have to go their own way. Mizuho Bank is releasing its own J-Coin. Mitsubishi Bank plans to issue its own MUFG Coin. Although Mitsubishi Bank did not say what kind of underlying technology it uses. But I guess it will also use Corda like Mizuho Bank. Therefore, I estimate that the two banks issued not a stable currency based on the pass, but an account-based stable currency.
If the two banks do issue their stable currency in this way, then this approach is completely different from the mainstream US issue of asset-backed issuance and token-based issuance. The US stable currency is usually based on Ethereum's ERC20 standard, so it can be circulated in any place that supports ERC20. The applicable scenarios include centralized exchanges and decentralized exchanges, e-commerce and offline payment scenarios. The stable currency issued by the Bank of Japan in its way can only be circulated within its network and cannot be applied to applications outside the network.
The result of this stable currency issuance method is that the two banks each have their own networks, realizing the migration from a centralized bank-wide clearing network across the country to the peer-to-peer clearing network between the two banks. Since Corda supports the direct billing method between the point and the point, the intermediary of the central settlement institution is removed, thus achieving the purpose of de-intermediation. This saves an important cost in the payment business process for the banking institution. Although this application will reduce the bank's operating costs, improve operational efficiency, and thus benefit consumers, this improvement is actually carried out within the existing market structure, not a paradigm shift. This improvement is more similar to the migration of a bank from a mainframe database to a relational database deployed on a PC server.
The way to issue stable coins based on Corda is a double-edged sword. This approach is very beneficial in the short term. First, it will meet existing regulatory requirements in many ways. Second, because it uses point-to-point direct accounting, the cost of payment will be further reduced and the efficiency of capital use will increase. And after the network is established, the stickiness to customers will be strengthened. Therefore, it will further consolidate the advantages of stable currency issuing banks in the market. But in the long run, because this system is actually closed, it does not have a competitive advantage over an open system. Such a system is at a disadvantage when there is a fully open liquidation and settlement system. But at that time, because the system was more ingrained, it would be more difficult to accept a new, open financial system and would therefore be defeated by an open system.
For the Japanese market, open stable currencies must be cut from the weakest areas of existing financial power, and are promoted by non-mainstream financial or non-financial institutions. In other words, the cut-in scene must conform to the best scenario of blockchain technology application, that is, homogenous and evenly matched. In the case of mutual distrust but facing a powerful common enemy, it is necessary to work together to win A scene of common interests. From this perspective, the most obvious application scenario must be cross-border payment. The stable coins issued by these two banks can be said to be very weak in this field. It can only cooperate with payment service providers in other countries in the traditional system docking. Therefore, it is impossible to compete with open stable currency in terms of convenience, cost and function.
If you appreciated the article, welcome to forward, also welcomed the support of the following ways: