Hokkoku Bank launches Japan’s first stablecoin backed by bank deposits

Hokkoku Bank has announced the launch of a stablecoin backed by bank deposits, the first of its kind in Japan.

Hokkoku, a regional bank based in the Ishikawa prefecture, will allow users of its digital payments mobile app to top up the stablecoin, known as Tochika, directly through their bank accounts. They can then use the stablecoin to make payments at local merchant stores.

The bank is working on onboarding more merchants and has lowered its processing fees to 0.5%. Japan is a cash-centric society, with digital payment solutions struggling to make inroads despite the giant leaps globally, including in neighboring China, where the government has taken action to punish those who refuse to accept cash.

Hokkoku will rely on its Tochituka app to make stablecoin payments. It launched the app in September 2023 via a digital currency initiative partnership with Kono Shinkin Bank. Through the app, users who receive community volunteer points could use them to make payments in participating merchant stores.

Aside from merchant payments, the bank is targeting the gift card market. Gift certificates are big in Japan, with one study estimating their market size will hit $29.7 billion by 2028. A sizable portion of the issuers rely on paper certificates, and Hokkoku sees an opportunity to offer them a better digital experience. Hokkoku is reported to be building on the Hyperledger Iroha network.

Tokenized deposits are gaining popularity as a middle ground between the legacy financial system and blockchain-powered stablecoins. The Bank for International Settlements (BIS) has touted tokenized deposits as “more conducive to the singleness of money.”

Monetary authorities and commercial lenders globally have embarked on tokenized deposit projects, ranging from South Korea, where the central bank is working with LG, to Australia, where the top financial regulator believes it’s the future of money.

In the U.S., Citibank (NYSE: C) launched the Citi Token Services last September. This service converts client deposits into digital tokens on the blockchain, allowing users to transfer them 24/7 at a fraction of the cost. It is only available to Citi’s wealthiest clients.

Watch: Centi releases first stablecoin on BSV and it’s backed by Swiss bank