Bank of Tokyo-Mitsubishi UFJ is on the way to becoming Japan’s first major bank to launch a virtual currency, sources familiar with the matter said Friday.
The cryptocurrency, dubbed “MUFG coin,” is being used for internal bank transactions for the time being.
However, the bank is considering releasing it for customers to use, the sources said, potentially enabling low-cost transactions such as money transfers worldwide.
BTMU would become Japan’s first major bank to launch a virtual currency for customers, but at least one other mega-bank in the region is working on such a project.
Bloomberg News reported in January that the People’s Bank of China has been researching the idea since 2014 and aims to roll out a product as soon as possible. The PBOC did not specify how it would work in relation to the yuan.
BTMU has begun trials of its virtual currency among its employees. One yen is convertible to one MUFG coin and can be used with a smartphone app.
If the currency goes into general use, it would allow users, for instance, to make international money transfers and then withdraw foreign currency at an airport, potentially reducing the heavy charges that regular ATM users face overseas.
BTMU is considering developing an ATM that releases cash when a customer holds an app-carrying smartphone near it.
The move comes as Japanese banks are trying to catch up with startups and financial institutions in Europe and the United States that have been promoting so-called fintech, or products and services that combine financial services with information technology. One example of this is sending cash credits from a smartphone.
Bitcoin is one of the best-known digital currencies, but its price is volatile, unlike BTMU’s.
Moreover, bitcoin’s image took a blow in 2014 with the collapse of the Tokyo-based Mt. Gox exchange. A French national who headed the exchange was subsequently investigated over the disappearance of funds. Mark Karpeles was charged in September, accused of stealing ¥321 million.
Japan already has rechargeable smart cards that allow railway passengers to pay for journeys and shoppers to make purchases in stores. However, users cannot transfer funds via the internet.
This year, a law was revised to regulate virtual currencies to prevent their use in criminal pursuits such as money-laundering.
Virtual currencies are defined as having asset value that can be used for settlement. The law requires exchanges that handle such virtual currencies to register with financial authorities.