Until recently, there was a noticeable lack of interest in bitcoin and the blockchain among the financial institutions of Asia. In fact, banks there were more likely to be issuing warnings about digital currencies than getting involved in any related activity.
It was the fall of Mt Gox in Japan and the Chinese central bank’s crackdown on bitcoin exchanges, events that both took place in 2014, that resulted in early barriers among financial institutions in those nations.
However, the recent upsurge in the popularity of blockchain technology in the global finance sector seems to have at least somewhat laid those concerns to rest. Now, the region’s banking sector is showing the same growing enthusiasm for the tech’s disruptive potential in banking that can be seen in Europe and North America.
Evidence of this sea change can be seen in the number of large financial institutions in China, Japan and Korea that have recently moved to launch or support initiatives involving blockchain and digital currency, and develop proofs of concept around forward-looking applications of the technology.
In this article, we look at which banks are engaging with the technology in the region.
Japan’s largest bank develops its own cryptocurrency
At the start of this month, Japan’s Bank of Tokyo-Mitsubishi UFJ (MUFG) revealed that it has developed its own digital currency nicknamed “MUFG coin” as part of its research into blockchain and distributed ledger technology.
The initiative was set up to replicate the peer-to-peer (P2P) exchange and mobile-wallet functionality that bitcoin provides, but without relying on its distributed network of miners.
MUFG began the project in the autumn of 2015, with the aim of decreasing the costs of managing financial transactions, particularly in the case of P2P transfers and remittances.
The country’s largest bank, MUFG ranked eighth among the world’s largest banks in total assets by Relbanks.com.
Major Korean bank kicks off blockchain remittance project
South Korea’s KB Kookmin Bank announced just this week that it is developing a blockchain solution for international remittances with the aim of offering “safer and faster” money transmission services.
The initiative, which is being carried out in partnership with local bitcoin startup Coinplug, is built on the premise of eliminating intermediary services involved in international SWIFT bank transfers, with an eye to offer cheaper consumer-facing services as a result.
A bank spokesperson remarked at the time:
“Blockchain technology is a new trend and we are trying to adopt this technology in a low level of data integrity platform. We are planning to escalate our services further to provide more secure and comfortable financial services for our customers.”
Kookmin has also announced plans to develop a blockchain-based “overseas fund transfer and data storage service” that can be used for verification when opening online bank accounts.
KB Kookmin Bank is the largest subsidiary of KP Financial group, which according to its 2014 annual report earned KRW 1.4tn ($1.16bn) in revenue from more than 30 million customers.
Singapore bank gets in on the blockchain action
With the aim of creating a distributed ledger project for trade finance, officials at both firms told Bloomberg that they have completed initial testing for the idea, and that they are seeking to collaborate with other firms on the initiative over the course of 2016.
While details are sketchy, DBS and Standard Chartered are considering various distributed ledger technologies to achieve project goals.
Furthermore, both banks have reportedly been investigating applications for the technology since as early as May of this year, according to a blog post by R3CEV co-founder Todd McDonald.
DBS Bank is Southeast Asia’s largest bank, reporting $319b in total assets as of September 2015.
Japanese firms team up for blockchain banking project
In December, Japan’s SBI Sumishin Net Bank announced that it is developing a proof-of-concept aimed at exploring blockchain-based banking services in conjunction with Nomura Research Institute (NRI), the research arm of Nomura Holdings.
While details on the initiative are scarce, NRI said it will seek to “examine business scenarios” with the goal of preparing a prototype for SBI Sumishin.
However, it is known that Dragonfly Fintech Pte, a blockchain firm, will assist in the project’s development.
In statements, NRI senior management director Minoru Yokote cited the project as an example of how the organization is seeking to embrace distributed financial technologies.
“NRI is committed to examining technical challenges of blockchain and suggesting ways to apply this technology to the banking industry.”
SBI Sumishin is a recent joint venture between Japan’s largest trust bank, Sumitomo Mitsui Trust Bank, and SBI Holdings.
Founded in 1965, NRI is Japan’s oldest private think tank, offering consulting services and provides IT solutions for various industries, including finance.
China’s central bank considers issuing digital currency
The PBoC revealed in a 20th January release that it had held a meeting discussing the possibility, which had included central bank governor Zhou Xiaochuan and deputy governor Fan Yifei, as well as a group of “relevant research institutions, major financial institutions and advisory bodies of experts”.
The central bank also received input from Citibank and Deloitte, as it weighed up how to issue the digital currency.
Notably, the central bank put together a team dedicated to digital currency research in 2014 – the work of which played into the Beijing meeting.
Japanese bank jons R3 blockchain consortium
Late last year, the R3CEV consortium announced that yet more institutions had joined its roster of 25 banks (now over 40) that were working with the group to investigate and develop use cases for distributed ledger technology.
One of those institutions was Japan’s Mizuho Bank, which notably has a long track record of engaging with the bitcoin industry, having served as a banking partner for bankrupt bitcoin exchange Mt Gox. Indeed, Mizuho is currently embroiled in ongoing lawsuits related to that ill-fated partnership.
Mizuho joined R3 in October, indication in statements that the bank saw the potential for “improved banking service in every aspect”.
“Distributed ledger technologies might become the next disruptive technology that has the potential to innovate everyday banking activities,” Toshitsugu Okabe, deputy president executive officer for the bank’s Incubation Project Team, said at the time
South Korean bank invests in blockchain firm
Blockchain remittance startup Streami closed a $2m seed funding round last December that notably included among its backers Shinhan Bank, one of South Korea’s largest financial services providers. The bank committed roughly $427,000 to the funding round.
By targeting the Asian remittance market from South Korea to China, Streami seeks to help people bypass illegal money transmission services in the area.
Shinhan Bank is headquartered in Seoul, South Korea. Historically it was the first bank in Korea, established under the name Hanseong Bank in 1897.
Asia image via Shutterstock