Japanese Banks Adopt IBC for Stablecoin Cross-Chain Transfers

The interchain's Inter-Blockchain Communication protocol now allows for Japanese bank-backed stablecoin to transfer from Ethereum and BNB Chain

BAAR, Switzerland, March 18, 2024 /PRNewswire/ -- What happened?: TOKI successfully enabled the cross-chain transfer of an ERC20-compatible token, designed as a stablecoin backed by multiple Japanese banks, on Ethereum (Sepolia) to BNB Chain testnets using IBC.

What is IBC? IBC is a blockchain interoperability protocol used by 110+ chains, facilitating secure, permissionless cross-chain interactions. IBC currently handles $2.7B in asset transfer volume every 30 days. It is recognized as a preferred solution for blockchain interoperability in the enterprise space, proving its adaptability in large-scale financial operations. The Interchain Foundation funds IBC's development teams, aiming to evolve it into the TCP/IP of blockchains: a universally adopted protocol for seamless communication.

Who did it? TOKI is an IBC-enabled cross-chain infrastructure provider that connects Ethereum, BNB Chain, Cosmos, and other major blockchains. They are developing the cross-chain infrastructure for Progmat, an issuance and management platform for RWAs and stablecoins. Progmat is a joint venture backed by Japan's largest financial institutions, such as MUFG, SMBC, Mizuho, and JPX. It was built to issue Japan's regulated stablecoins.

Why does it matter? TOKI expands IBC to non-Cosmos blockchains by providing a Light Client Proxy contract with proof verification within Intel SGX. To further enhance security, the architecture will add Multi-Party Computation to enable multiple operators to sign a single transaction. This approach enables secure interoperability via IBC while keeping gas costs low.

How did it work? Progmat connects permissioned and permissionless networks, including ETH and BNB Chain, which did not have native IBC. The transfer was conducted through a lock-and-mint mechanism compliant with ICS-20, the IBC token transfer module that facilitates tens of millions of transfers per year.

Will there be a lasting impact? Progmat's stablecoins are compliant with Japanese regulation. They will be pegged to currencies such as USD and JPY. One of the key features of Progmat is that the fiat currency assets serving as collateral are 100% deposited in a trust bank, unlike other stablecoins, ensuring the safety of the collateral assets even if the stablecoin issuer fails. Stablecoins will be issued on Progmat's stablecoin platform in the second half of 2024. In line with the launch of these stablecoins, TOKI will implement a burn-and-mint mechanism to facilitate the cross-chain native token swap through IBC. Like Circle's CCTP does for USDC, but open, and on IBC.

For more information, visit the IBC blog.

Susannah Evans, IBC Product Lead at Interchain Foundation, is available for interview.