Japan and South Korea to be connected by payment network for digital currencies
SBI Digital Practice and South Korea’s Nodeinfra have agreed to jointly develop a cross-border payment and settlement network between Japan and South Korea based on Canton Network. The project has been named Project Musubi.
According to SBI’s website, at the initial stage, the companies will use test tokens denominated in yen and won rather than commercial stablecoins. In the future, the partners plan to transition to regulated digital currencies once an appropriate regulatory framework is established in both countries.
Project Musubi is expected to simplify settlements between Japan and South Korea, where the U.S. dollar is used as an intermediary currency in some transactions. The new system will enable both sides of a foreign exchange transaction to be settled simultaneously, which should reduce settlement risks and the number of intermediaries.
How the process will work
SBI Digital Practice will be responsible for integrating the network with existing financial infrastructure and attracting Japanese participants. Nodeinfra will handle the core settlement protocol, Daml smart contracts and developer tools, as well as onboarding South Korean financial institutions.
SBI already has its own infrastructure for yen-denominated settlements. In June, the group launched the JPYSC stablecoin through SBI Shinsei Trust Bank. However, it will not be used during the initial testing phase of Project Musubi.
In South Korea, regulation of won-denominated digital assets is still under development, so no timeline has yet been announced for the commercial launch of the project. In the future, SBI and Nodeinfra plan to expand the network to additional currencies, jurisdictions and asset classes.
Why settlements between Japan and South Korea remain complicated
One of the key challenges in cross-border settlements between Japan and South Korea is that direct yen-to-won conversion is not available for all transactions. As a result, banks and other financial institutions may use the U.S. dollar as an intermediary currency: yen is first converted into dollars, and then dollars into won, or vice versa. This structure increases the number of transactions and intermediaries, adds extra fees and makes the settlement process more complex.
Another issue is that the two sides of a foreign exchange transaction may not be settled at the same time. As a result, one party may have already sent funds while the corresponding payment has not yet been completed, creating settlement risk. Using a shared network and a simultaneous asset-exchange mechanism allows both sides of the transaction to be executed synchronously, reducing reliance on intermediaries and lowering the risk of delays or incomplete settlement.
As a reminder, Decta is introducing stablecoin-based settlements for international operations.
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