Leading Japanese Firms Partner on Security Token Research

Mitsubishi UFJ Financial Group - Japan's largest financial group and the fifth largest bank in the world by assets - is leading a 22-member research consortium to develop standards around security token management.

The group - the Security Token Research Consortium - includes security issuers, broker dealers and technology companies, such as NTT Docomo Inc. and KDDI Corp., the two largest telecommunications companies in Japan.

Securitize, a firm that enables the issuance and management digital securities, will be the only company issuing security tokens for the platform.

The consortium is pursuing ways to develop, offer and onboard financial transactions services using blockchain, with a focus on automatic settlement for securities and funds.

It plans to develop a dedicated security token blockchain called "Progmat" to provide a platform for managing securitized assets, including trust functions to minimize counterparty risk.

As a part of the research being conducted, the consortium will also apply for a Japanese patent regarding infrastructure and organizational structure for managing security tokens.

In March, Japan's legislative body, the Diet, introduced a new bill to define security tokens as liquid securities, which would amend the existing Act on Settlement of Funds and the Financial Instruments and Exchange Act.

Earlier this year, Securitize launched its digital security offering service and a referral network to help companies issue and manage digital securities and registered with the SEC as a transfer agent to act as the official record keeper of securities issued on blockchain.

The Japanese financial services giant is developing a blockchain payments network with fintech company Alkami Technologies to be launched in the first half of 2020.

Its blockchain trade platform with NTT Data aimed at fostering trade between Singapore and Japan is being tested now, while the company is also participating in a blockchain proof-of-concept to streamline know-your-customer processes with HSBC Singapore, OCBC Bank and the Info-communications Media Development Authority, a Singapore regulator.