Financial Innovation in 2026: Japan's Megabanks' Goals for Web3 Integration and Digital Asset Strategies

The year 2026 is poised to be a turning point for Japan’s financial industry. Last November, the three megabanks—Mitsui Sumitomo Bank, MUFG Bank, and Mizuho Bank—announced a joint stablecoin initiative, which is not merely about developing a new product but symbolizes the integration of the existing financial system with blockchain technology. The regulatory transition under the Financial Instruments and Exchange Act (FIEA) is accelerating, and crypto asset businesses operated by bank subsidiaries are entering a phase of realization.

Keiwo Iso, Executive Managing Director (Group CDIO) of Mitsui Sumitomo Financial Group, is at the forefront of promoting digitalization and financial innovation. His statements highlight how traditional financial institutions are responding to technological innovation and seeking new revenue streams, which is also an urgent task for Japan to avoid falling behind in the international competition.

Background and Strategic Significance of the 3 Megabank Stablecoin Initiative

The realization of the joint stablecoin project among the three megabanks is built on steady research and development since the early 2020s. Domestic legal frameworks have advanced in 2024, and the GENIUS stablecoin law was enacted in the US in 2025, reflecting rapid progress in the international environment.

The key feature of this joint initiative is its premise of connecting with existing financial infrastructure. By integrating traditional payment networks like Zengin Net and BOJ Net with blockchain-based new systems, large-scale scaling becomes possible for the first time.

The market size of US dollar-denominated stablecoins has reached approximately 40 trillion yen, becoming essential for crypto asset trading. Japan’s lack of a domestic yen-based stablecoin raises concerns about losing part of its currency issuance sovereignty. International institutional investors and sovereign funds are already using stablecoins to purchase Bitcoin, and the risk of Japan being left behind in this flow is not low.

Use Cases and Implementation Strategies

The joint stablecoin initiative among the three megabanks is currently in the PoC (proof of concept) stage, with major global companies like Mitsubishi Corporation as partners, exploring specific use cases. Corporate cash management systems (CMS) are a prime example.

Global corporations hold large amounts of funds worldwide, but due to cut-off times in existing financial systems, there are always funds that do not accrue interest 24/7. Combining stablecoins with 24/7 settlement capabilities allows for more efficient utilization of idle funds.

At the same time, strict verification of AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) measures is underway. This initiative is positioned as a critical phase where existing systems connect with blockchain-based decentralized finance (DeFi), and scaling here is expected to accelerate overall financial innovation.

Differentiation from Competing Yen-Based Stablecoins

JPYC, launched in October 2025, is attracting attention as Japan’s first yen-based stablecoin, but currently has an issuance cap of 1 million yen.

The difference with the 3 megabank plan lies in its ability to connect directly with existing official payment infrastructure. Direct connection to networks like Zengin Net or BOJ Net faces high technical and regulatory hurdles, making it unlikely for JPYC to achieve this in the short term. Conversely, the main value proposition of the 3 megabank plan is precisely enabling this connection.

However, the 3 megabank plan is not expected to cover small-scale retail payments. As seen with domestic bank-operated personal remittance apps like “Kotorasoukin” (free up to 100,000 yen per transaction), small and large payments tend to be processed on different layers. The combination of JPYC and the 3 megabank plan is expected to create a more comprehensive payment ecosystem through mutual complementarity.

Potential of Crypto Asset Business with Transition to FIEA

The transition of regulations to the FIEA will enable bank subsidiaries to legally issue, buy, sell, and mediate crypto assets, opening new business opportunities.

The formation and offering of crypto asset ETFs are being considered as a natural option. Discussions on custody (asset safekeeping) and intermediary services are progressing within the group, but concrete implementation has not yet been achieved. Many technical and legal challenges remain, including user protection, handling price volatility, and system integration.

A particularly important issue is reconciling the “self-custody” principle unique to Web3 services with traditional Japanese financial practices. While self-custody wallets are becoming a technical standard, they pose high hurdles for Japanese customers. Financial institutions are strategizing whether to offer custodial wallets or gradually shift toward a self-responsibility model, balancing customer needs and technological trends.

Accelerating Digital Asset Tokenization and Transformation of Banking Models

Tokenization and on-chainization of assets are expected to extend beyond settlement layers into wholesale banking, asset management, and interbank markets and securities trading.

Automating complex transactions such as 24/7 continuous settlement, low-cost instant cross-border remittances, and DvP (Delivery versus Payment) will dramatically increase processing volumes. At this stage, the emergence of quantum computing is inevitable, and the entire financial system will be built on infrastructure vastly different from today.

Tokenization of RWA (Real World Assets) will significantly expand investment options. Advances in generative AI will make it possible for AI agents to manage assets and execute trades on behalf of humans. Blockchain networks like Avalanche, with their programmability and high-speed, low-latency features, will serve as critical technological foundations for ultra-high-frequency trading and large-scale tokenization ecosystems.

Efficiency of Interbank Markets and Infrastructure Integration

Often overlooked, the interbank market—where financial institutions exchange funds and securities—is also subject to tokenization and on-chainization. Improving efficiency in this area will bring structural changes to banking operations. Transactions previously limited to business hours will shift toward 24/7, real-time global settlement, necessitating a fundamental reorganization of banking models.

Stages of Technological Innovation and Bank Adaptation Strategies

Financial digitalization and innovation will not progress through a single breakthrough but as a phased process where multiple technological infrastructures support each other. As with the history of electricity—where power plants, transmission, and distribution took a century to mature—blockchain and supporting technological infrastructure are expected to evolve over a compressed span of 5 to 10 years.

Rather than a complete shift to cloud-native operations, effective integration of on-premises and cloud environments is being adopted as an approach to realize new data security and operational efficiency. New communication protocols like MCP are enabling AI to manage both environments seamlessly.

The Future of Banking and Finance: A Hybrid Model of AI and Humans

The key to the competitiveness of financial institutions after 2026 will be their ability to build “AI-Ready” services in the era of AI agents. The generation where smartphones become a thing of the past and AI agents through natural language interfaces proactively meet customer needs is approaching.

In this context, the more financial institutions adopt AI technology, the more challenging service differentiation becomes—an ironic situation. Therefore, the uniquely human thought processes, namely “negative capability” (the ability to remain patient and think deeply in uncertain situations), are considered the source of competitive advantage for banks.

Just as the physical branch network of banks dramatically changed over the past decade, the functions and roles of banks will undergo a fundamental transformation again in the next decade. Anticipating the future of the financial ecosystem three to five years ahead and continuously experimenting and validating multiple scenarios will be essential for new-era bank management.

Conclusion: Moving Toward an Era of Continuous Reflection Amidst Turbulence

The keyword for 2026 is “revisiting programmability.” The creation of diverse use cases for stablecoins, integration of decentralized finance, evolution of AI agent technology, and the practical application of quantum computing will collectively transform the financial system far beyond current imagination.

In this process, what financial institutions need most is the ability to constantly ask “What is about to happen?” in a rapidly changing environment, to conduct many trials, and to keep thinking amid uncertainty. As AI becomes more generalized, the paradoxical truth will be that human creative and flexible thinking will become increasingly valuable, shaping the competitive landscape of the future financial industry.