Sumitomo Mitsui Banking Corp. plans to expand into NFT technology despite unfavorable conditions for … [+]
Japan, with an aging population biased toward cash transactions, does not seem to be the most fertile ground for NFT projects, yet the giant Sumitomo Mitsui Banking Corp. is giving it a go on the institutional level, or so it said in a late-July press release, which provided only the outlines of its strategy. The bank didn’t respond to multiple requests for more information, and partner HashPort would not provide additional insight on specifics.
SMBC plans to create a Token Business Lab that will partner large-scale institutions with HashPort to provide NFT (nonfungible token) and decentralized technology services. The lab will also “conduct surveys, research and demonstration experiments related to the promotion of the token business,” according to the company’s statement announcing the partnership.“We aim to build an ecosystem involving many players in the NFT domain,” stated the bank’s press release.
It is not clear what form the NFTs will take—whether that be creating loyalty tokens or simply using blockchain technology to certify transactions. At its core, an NFT can represent any kind of asset, including the receipt for a transaction. SMBC could use HashPort’s blockchain technology to certify transactions and grant customers NFTs.
HashBank, a subsidiary of HashPort and the direct partner to SMBC in the Token Business Lab initiative, is looking to partner with the bank’s institutional clients to give them the know-how of NFT technology. In an October 2021 study of NFT awareness in Japan, only 13.5% of respondents knew what NFTs were and had purchased them.
NFTs created in the token lab will live on the Palette blockchain, HashPort’s own proof-of-authority mechanism. Proof-of-authority blockchains rely on a small number designated validators, in this case “multiple reliable companies” part of the Palette Consortium.
HashPalette, the company’s NFT blockchain, creator incubator and NFT marketplace will provide clients with minting services while HashBank will focus on holding the custody of users’ wallets and assets.
“HashPalette is focusing more on how to answer that [NFT] infrastructure side and HashBank is focusing on the financial side,” HashPort Group CEO Seihaku Yoshida tells Forbes.
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Kazuyuki Tsuji, CEO of HashBank, says the Token Business Lab will be implemented in two phases. The first is an exploratory phase as SMBC looks at how to best use NFT technology for its own customers.
“That is the huge experiment of the bank,” says Tsuji, “using NFT as their business.”
Phase two then consists of expanding operations to SMBC’s institutional clients, partnering with them to create their own NFT projects.
“Even if they know the word, they do not know how to build NFTs from scratch,” adds Yoshida.
SMBC is not the first Japanese bank to experiment with decentralized technology nor the first to adopt NFT initiatives. In March, the Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank, partnered with Animoca Brands to “support the development of the NFT market.” Animoca is one of the leading blockchain game creators and crypto investors in the world, reaching a $5.9 billion valuation in a funding round last month.
Implementation of blockchain technology in Japan may face challenges. Executives at HashPort pointed to Japan’s demographics as a barrier to mass adoption; an aging population coupled with reliance on cash makes digital assets unpopular when compared with other countries.
In fact, the Bank of Japan recently canceled plans to implement a central bank digital currency (CBDC) because of low public interest. In a Statista report of NFT interest by country, Japan received a score of 17 out of 100, ranking 54 out of the 70 nations surveyed. Hong Kong was ranked first.
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