Sumitomo Mitsui takes an NFT step

Japan, with an aging population biased against cash transactions, does not appear to be the most fertile ground for NFT projects, but giant Sumitomo Mitsui Banking Corp. gives it a chance at the institutional level, or so it said in a late July press release, which only outlined the strategy. The bank did not respond to multiple requests for more information, and its partner HashPort would not provide further insight into details.

SMBC plans to create a Token Business Lab that will partner with large-scale institutions with HashPort to provide NFT (nonfungible token) and decentralized technology services. The lab will also “conduct investigations, 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 it is to create loyalty tokens or simply use blockchain technology to certify transactions. At its core, an NFT can represent any kind of asset, including the receipt of a transaction. SMBC can use HashPort’s blockchain technology to certify transactions and provide customers with NFTs.

HashBank, a subsidiary of HashPort and the direct partner of SMBC in the Token Business Lab initiative, wants to work with the bank’s institutional clients to provide them with the knowledge 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 of designated validators, in this case “multiple trusted companies” part of the Palette Consortium.

HashPalette, the company’s NFT blockchain, creator incubator and NFT marketplace, will provide customers with coining services while HashBank will focus on keeping custody of users’ wallets and assets.

“HashPalette focuses more on how to respond to that [NFT] the infrastructure side and HashBank focuses on the financial side, says HashPort Group CEO Seihaku Yoshida. Forbes.

Interested in learning more? Subscribe to Forbes’ CryptoAsset & Blockchain Advisor here.

Kazuyuki Tsuji, CEO of HashBank, says that the Token Business Lab will be implemented in two phases. The first is an exploratory phase as SMBC looks at how best to use NFT technology for its own clients.

“It’s the huge experiment of the bank,” says Tsuji, “using NFT as its business.”

Phase two then consists of expanding the business to SMBC’s institutional clients, and working with them to create their own NFT projects.

“Even if they know the word, they don’t 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, 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 valuation of $5.9 billion 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 combined with reliance on cash makes digital assets unpopular compared to other countries.

In fact, the Bank of Japan recently canceled plans to implement a central bank digital currency (CBDC) due to low public interest. In a Statista report on NFT interests by country, Japan received a score of 17 out of 100, ranking 54 out of the 70 nations surveyed. Hong Kong was ranked first.