Progmat & Datachain launch cross-border stablecoin transfer network

Progmat and Datachain have jointly launched project “Project Pax”, aimed at building a cross-border remittance infrastructure for stablecoins.

The cross-border remittance market reached $182 trillion (approximately 28,000 trillion yen) as of 2022. However, cross-border remittances are attracting attention for problem-solving, with the G20 calling for fundamental improvements in four areas: “remittance costs,” “arrival speed,” “access,” and “transparency.” In this market, Progmat and Datachain aim to realize high-speed, low-cost cross-border remittances that can operate 24 hours a day, 365 days a year by utilizing stablecoins.

The cross-border remittance infrastructure of Project Pax will realize stablecoin remittances through banks using Swift’s existing API framework, considering AML/CFT, regulatory compliance, operational structure, and the hurdles for corporate wallet usage.

Proof of concept experiments using prototypes are scheduled to begin promptly, with the involvement of major domestic and international financial institutions already decided. While expanding cooperation to more countries and financial institutions, the partners aim for commercialization in 2025.

Background and Purpose

Currently, the total market capitalization of stablecoins has grown to over 25 trillion yen, but it is still less than 0.5% compared to the total market capitalization of fiat currencies. This is because the use of stablecoins has been mainly centered on cryptocurrency-related transactions, and its use as a means of payment in the real economy is still in its early stages globally.

Even in this context, Tether, a Hong Kong-based company, reported a net profit of $4.5 billion (approximately 700 billion yen) in the first quarter of 2024. As the use of stablecoins as a means of payment in the real economy expands in the future, the market size of stablecoins is expected to grow dramatically, with some predicting it will become a market of over 400 trillion yen by 2028.

Regarding cross-border remittances, it boasts a massive market size of $182 trillion (approximately 28,000 trillion yen) as of 2022. Furthermore, the G20 has set goals for 2027 in four aspects: “remittance costs,” “arrival speed,” “access,” and “transparency,” and the fundamental improvement of these has become a major international topic.

In Japan, based on stablecoin-related laws enacted ahead of other countries, the issuance of regulatory-compliant stablecoins and their utilization in the real economy are expected to begin within 2024. In this context, Progmat is leading the development of infrastructure and practical implementation for issuing stablecoins in accordance with stablecoin-related laws, called the “Progmat Coin” platform, which supports various blockchains including permissionless (public) blockchains, in collaboration with major financial institutions and industry-leading companies. This platform allows for the issuance of stablecoins that companies can use with confidence, addressing not only regulatory compliance but also accounting and tax aspects. Moreover, various branded stablecoins using the “Progmat Coin” platform can be issued in major fiat currencies such as JPY, USD, EUR, etc., assuming flexible use both domestically and internationally.

In traditional use cases centered on the digital asset market, a stablecoin has mainly been considered for P2P remittances without involving financial institutions. However, in cross-border remittances in the real economy, the role played by Swift and banks remains important from the perspectives of AML/CFT, regulatory compliance, operational structure, and the hurdles for corporate wallet usage.

Particularly in use cases such as international remittances for trade settlements by businesses, while promoting the benefits of cross-border remittances using stablecoins (high-speed, low-cost, and 24/365 operation), it is also necessary to consider continuity with current processes in businesses. Specifically, solutions that conflict with current processes could impose a significant burden from the user’s perspective, such as process duplication and risk tolerance, potentially becoming a greater barrier to adoption than the benefits of remittance flexibility.

From this perspective, by providing a new network that utilizes stablecoins as an international remittance process between domestic and foreign financial institutions while maintaining the international remittance process and user interface (UI) between businesses (stablecoin users) and financial institutions, it becomes possible to return the benefits of stablecoins to society in a more realistic form at an earlier stage.

Specific Collaboration Content and Expected Effects

In “Project Pax,” Progmat and Datachain will collaborate to build a stablecoin cross-border remittance infrastructure adapted to Swift’s API mock/simulation environment.

This infrastructure will enable stablecoin remittances on the blockchain after going through the review process of domestic and international financial institutions from the initial stage, and will implement versatile functions that can become a global standard, such as stablecoin remittances across multiple different blockchains and remittances after conversion to existing pre-issued stablecoin.

For cross-chain transactions across blockchains, the infrastructure will utilize the blockchain inter-communication protocol “IBC”, the middleware “LCP” developed by Datachain, the stablecoin contract jointly developed by Progmat and Datachain, and the liquidity pool provided by TOKI, which provides cross-chain infrastructure.

Roles of Each Participant in “Project Pax

• Progmat: Joint development of this infrastructure (linkage with “Progmat Coin” and overall business design/promotion)
• Datachain: Development of this infrastructure (cross-border remittance infrastructure, cross-chain, etc.)
• Related Financial Institutions: Review of this infrastructure from practical aspects, etc.

With the provision of this infrastructure, it is expected that business companies, which are stablecoin users, will be able to make faster and cheaper international remittances with an experience continuous with conventional international remittances, without strongly being aware of the existence of stablecoins and blockchains. The partners will verify and visualize quantitative effects through proof-of-concept experiments.

For financial institutions, by utilizing existing mechanisms, it becomes possible to provide new remittance options to corporate customers while suppressing investment, without the need to build a new system from scratch.

Future Plans

The partners will promptly begin proof-of-concept experiments using prototypes, aiming for commercialization in 2025.

In the process towards commercialization, we will expand participating financial institutions and target regions sequentially, while building a global standard for international settlement networks using SCs.

Origin/Vision of “Project Pax”

This project is not a Web3 project that opposes the current financial system. By implementing the strengths of Web3 and blockchain technology in a way that has continuity with the current economic system, the partners aim to create true sustainable impact by fusing both.

Specifically, they aim to build an environment where anyone can access the financial system more easily and safely, and to realize a more peaceful world by solving economic disparities and economic issues in the world, including emerging countries. Moreover, this initiative is positioned as an indispensable piece of the mechanism that serves as the foundation for realizing the above.

“Project Pax” Related Organizations

• Co-developer of “Progmat Coin Platform” and “Cross-border Remittance Infrastructure”
  Company Name: Progmat
  Representative: Tatsuya Saito, Founder and CEO
• Developer of “Cross-border Remittance Infrastructure”
  Company Name: Datachain
  Representative: Tetsushi Hisata, CEO
• Related Financial Institutions (at the time of announcement)
  — Mizuho Financial Group
  — Sumitomo Mitsui Financial Group
  — Mitsubishi UFJ Financial Group

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