Capital markets News

Japan’s largest bank MUFG provides blockchain utility token issuance platform


We previously reported that MUFG Trust’s blockchain platform Progmat would support security tokens and stablecoins issued by multiple firms. However, it will also be a platform for ‘utility tokens’. 

Initially, these utility tokens are quite different from public blockchain tokens. They will be used to provide shareholder rewards (yuutai). 

Almost half of listed Japanese firms provide some sort of reward to stockholders, often those holding more than 100 shares. Typically this takes the form of discounts on the company’s products. For example, Japan Airlines provides a 50% discount on a one-way domestic flight and the more shares owned the more discount coupons are provided. But it can also involve gift cards, points, memberships and other benefits. Another example is SBI provides XRP cryptocurrency to investors.

By using MUFG’s Progmat UT (utility token), companies don’t have to distribute paper coupons and membership cards. Instead, they can provide a utility token as an NFT. By tokenizing the benefit, the stockholder can transfer the gift, although the token will control any restrictions on transfer. In theory, making the gift transferable could make it more valuable to the stockholder. 

Additionally, the gifts might have a more concrete financial value, allowing a stock’s return to be calculated as a combination of capital gain, dividend, and gift value.

Where gifts and benefits are not provided by the listed firm directly, but instead it gives something like shopping vouchers, a token reduces the paperwork by enabling real-time tracking of expenditure.

Progmat Utility Tokens are not restricted to benefits linked to stocks issued as Security Tokens. MUFG also plans them to be used by existing listed stocks, as well as coupons and membership cards unrelated to stock benefits.

Given these utility tokens are consumer facing, they need a mobile wallet, and MUFG plans to release a version at some point in 2022 after some initial demonstration experiments.

Other Progmat news

At an early stage in its blockchain journey, MUFG collaborated with other financial services companies to create the Security Token Research Consortium, which now has a membership of 84 firms. From April, the consortium is being renamed the Digital Asset Co-creation Consortium, given it is no longer purely research, and it expanded to stablecoins and utility tokens.

Additionally, MUFG announced another asset-backed security (ABS) will be issued as a security token. The token will be underpinned by a joint venture company that owns rights to student rental housing. Kenedix is the real estate asset manager, and MUFG is the trustee and provides custody of the token private keys. Daiwa Securities and SMBC Nikko Securities will sell the tokens to clients and provide custody.

Last July, MUFG Trust announced a similar real estate security token also involving Kenedix but with SBI Securities and Nomura Securities handling the distribution.  Mitsui & Co Digital Asset Management used the Progmat platform for another real estate token in December 2021.

Progmat uses R3’s Corda enterprise blockchain.

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