Digital currency pilot project to include banks, companies

The Yomiuri Shimbun

November 26, 2021

A digital currency that can be used for transactions between companies will begin being tested in Japan by a total of 74 companies and organizations of different sectors, including major banks, trading companies and electric power utilities, by the end of this year.

A digital currency linked to corporate savings accounts will be issued by banks and used for transactions between participating companies.

That will allow the firms to record transaction information in the currency, making it easier for them to manage their books. Many problems remain, however, such as the protection of customer information.

DeCurret Inc., an IT firm leading digital currency businesses in the private sector announced the project Wednesday. The firm’s investors include more than 30 companies, with banks and a trading firm among them.

With the participation of three megabanks, along with Sumitomo Mitsui Trust Bank and Japan Post Bank, Mitsubishi Corp. and Kansai Electric Power Co., the digital currency system is hoped to be put into practical use as early as fiscal 2022.

Toshihide Endo, a former Financial Services Agency chief and now a senior adviser to DeCurret, said: “It is one of the nation’s largest digital currency initiatives, transcending industries and competitors. It could become the nation’s growth engine.”

The digital currency is tentatively called “DCJPY,” meaning digital currency of Japanese yen. Participating companies will be issued 1 DCJPY for ¥1, linked to their checking accounts for transaction settlements. It can be converted into cash at any time.

Unlike cash, DCJPY carries its own record of the transactions in which it has been used. If company A purchased 100 units of product X from company B at 100 million DCJPY (¥100 million), for example, “100 units of product X” will be recorded in the 100 million DCJPY that company A pays to company B.

Cash transactions need to be managed with invoices and receipts, but the DCJPY-based transaction will be automatically reflected in books and inventory lists when a transaction is made once an in-house system is linked to DCJPY.

The pilot project will be conducted in 10 areas, including retail and distribution, electric power that deals with renewable energy and trade settlements that involve maritime transport. Seven & i Holdings Co. will be among companies participating in the demonstration in the field of retail and distribution.

Banks are required to reflect the status of corporate transactions in the balance of their accounts as needed. Because linking a company’s DCJPY with multiple bank accounts could impose a burden on banks’ payment systems, only one bank will issue DCJPY for each sector for the time being.

In order to put the system into practical use, transactions need to be smoothly made between companies with accounts at different banks. Since that requires banks to share information on the status of corporate transactions, proper management of customer information is required.

The system uses blockchain technology, which offers better security by storing and managing transaction data across a network of computers as a defense against counterfeit currencies, but it is also necessary to introduce countermeasures against cyber-attacks and to operate the system in a stable manner.