Circle, the issuer of the USDC stablecoin, announced a Memorandum of Understanding with SBI Holdings, the prolific web3 and blockchain investor. SBI will help Circle to circulate USDC in Japan and together they will “expand the use of stablecoins in Japan.”
USDC is the second largest stablecoin with a $24.6 billion market capitalization. While USDC is considerably smaller than Tether, the latter is not issued from a regulated jurisdiction. Plus, the State of New York banned Tether, making regulated institutions wary.
In terms of the deal, SBI Shinsei Bank will also provide banking services to Circle. And the SBI Group will adopt Circle’s Web3 solutions including its programmable wallet.
SBI’s crypto exchange subsidiary SBI VC Trade applied for a license as an electronic payment instruments service. This is to help to distribute USDC.
In June Japanese regulations came into effect for stablecoins. It distinguishes between three types of domestically issued stablecoins versus those issued offshore. The license that SBI VC Trade has applied for is for distributing offshore stablecoins.
“Our partnership with SBI Holdings represents a shared vision for the future of digital currency, and is a significant milestone in Circle’s expansion plans in Japan and Asia Pacific,” said Jeremy Allaire, CEO and co-founder of Circle. “We are excited to collaborate with SBI towards setting new standards in the financial sector in Japan.”
What about stablecoins to settle securities trades?
What is not mentioned in the announcement is the potential issuance of a Yen stablecoin by Circle. Also, USDC could potentially be used for international capital market transactions.
The reason a local stablecoin is topical is that SBI is one of the biggest players in Japan in tokenized capital markets. Its Osaka Digital Exchange (ODX) is about to launch the trading of tokenized securities which needs on-chain money. It is also an investor in Progmat which is the most prolific issuing platform for tokenized securities and includes the Progmat Coin platform for stablecoins. That said, there is already a cross-bank collaboration on stablecoins within Japan, which may mean Circle’s involvement is not considered necessary.
Howevever, we believe USDC could be useful for cross border securities trading, such as by AsiaNext, an SBI joint venture with Switzerland’s SIX.
In a similar vein, Circle has a relationship with BlackRock, which manages much of the USDC reserves. When BlackRock invested in Circle it also mentioned the potential for using stablecoins in capital market transactions.