Debuting the Yen-Backed Stablecoin
Sony Bank and Soneium have teamed up to develop Japan’s first Yen-backed stablecoin to offer low transaction costs without sacrificing transaction efficiency. The Japanese banking giant Sony Bank will run an extensive trial of the new stablecoin to meet regulatory standards.
With this partnership, Japan has taken a big step toward embracing blockchain technology and the larger Web3 ecosystem. Sony Bank and Soneium intend to reduce transaction costs through the use of blockchain solutions, a benefit that has proven difficult for traditional financial institutions to attain.
Benefits of a Yen-backed Stablecoin
Users will experience many reduced costs when executing financial transactions by using Soneium’s blockchain platform, leading to more streamlined and effective payment procedures. These coins are not just another type of virtual currency; they are a new approach to financial management and have significant effects on any nation’s economy.
Besides reducing transaction costs, these fiat-pegged cryptocurrencies help facilitate cross-border payments. Despite all of the excitement surrounding this project, Sony Bank is moving cautiously. The testing process, which could take several months, is essential for determining whether the currency complies with the legal specifications provided by Japanese authorities.
Stablecoins’ Role in Global Finance
The imminent launch of the Yen-backed Stablecoin by Sony Bank is part of a wider global trend toward the use of digital currencies. Through the Ministry of Economy, Trade, and Industry, Japan has been at the forefront of this movement, actively encouraging investments in blockchain technologies.
Stablecoins have become essential tools in the fight to modernize the financial sector as the world comes to embrace Web3 and decentralized finance (DeFi). If the collaboration between Sony Bank and Soneium is successful, stablecoins could become more widely used in Japan’s financial sector.
Since it’s yen-backed, this digital asset is a desirable choice for people and companies looking to hedge against the volatility that is frequently associated with cryptocurrencies. Furthermore, the currency provides security and transparency that are essential in the current digital financial environment because it runs on a blockchain.
Nevertheless, it is worth noting that in periods of market volatility, some stablecoins have had trouble keeping their peg to fiat currencies. The March 2023 banking crisis, which impacted companies like Silvergate and Signature Bank, was cited in a recent CoinGecko report as an illustration of how such market volatility can jeopardize the stability of these digital currencies.
However, well-known fiat-pegged digital assets like DAI, USD Coin (USDC), and Tether USD (USDT) have proven to be more resilient in holding their fiat-pegged values during volatile market conditions.
Market Performance and Future Outlook for the Stablecoin Market
Recent data showed that stablecoins now account for a larger portion of the cryptocurrency market. Their share of the cryptocurrency market capitalization has increased significantly from roughly 2% in early 2020 to 8.2% currently.
This increase highlights how important stablecoins have been to the cryptocurrency industry, even during the bear market that occurred between 2022 and 2023. Furthermore, the top 10 fiat-pegged stablecoins’ combined market capitalization has increased significantly in recent years.
The market cap increased by 3,121.7%, from $5 billion to $181.7 billion, between January 2020 and March 2022. However, it dropped significantly following the collapse of Terra’s algorithmic stablecoin (UST).
This total market capitalization reached $161.2 billion by August 2024, up from its November 2023 level of $119.1 billion. With a combined 94% market share, Tether USD (USDT), USD Coin (USDC), and DAI continue to dominate this space.
With a 70.3% market share, USDT has cemented its position as the leader, while USDC has noted a decline in market share since the banking crisis in March 2023. USDT, USDC, and DAI account for 97.1% of the total stablecoin holders.
With over 5.8 million wallet users, USDT has more than twice as many as its nearest rival, USDC. Commodity-backed stablecoins have grown significantly in addition to fiat-pegged ones.
This is due in large part to the success of Tether Gold (XAUT) and PAX Gold (PAXG), which together account for 78% or $1.3B of this segment’s market cap as of August 2024. However, the market capitalization of commodity-backed stablecoins is still only 0.8% that of their fiat-backed counterparts.
