Turning Point in 2026 — Sumitomo Mitsui Banking Corporation's Vision for Digitalization of Financial Infrastructure and Preparations for the Quantum Era

2026 will likely be the year when Japan’s financial system reaches a major turning point. The full-scale development of a joint stablecoin plan by three megabanks, the transition of supervisory authority to the Financial Instruments and Exchange Act (FIEA), and the trends of asset tokenization and on-chainization are fundamentally transforming traditional banking functions.

Keiwo Iso, Group CDIO of Sumitomo Mitsui Financial Group, discusses the future of finance, including digital transformation, stablecoins, and even quantum computing, positioning himself as a leading figure in these changes. Last summer, during a conference, he mentioned “let’s collaborate” regarding the stablecoin concept. Now, it is becoming a reality, and its impact on bank management is imminent. Let’s explore the strategic thinking behind these developments.

The Three Megabank Joint Initiative—Connecting with Existing Systems is Key

The joint stablecoin plan by the three major banks was just a statement last summer, but with the advancement of domestic legal frameworks and the passage of the GENIUS Act in the U.S., it has rapidly materialized between 2024 and 2025. The Financial Services Agency (FSA) was concerned about U.S. developments and played a leading role in this process.

A notable aspect of this joint initiative is the principle of “standardization” from the outset. Learning from the early days of cashless payments, when many different systems proliferated, this project envisions a platform with common standards and interoperability, where financial institutions compete at the application layer.

Connecting with existing financial infrastructure is crucial. If integration with the Zengin System and the Bank of Japan Net (BOJ Net) can be achieved, convenience will be greatly enhanced. Until now, traditional payment systems and blockchain-based decentralized finance have existed separately, but connecting these points could dramatically expand scale and opportunities.

In the U.S., the market capitalization of stablecoins has reached about 40 trillion yen, becoming essential in Bitcoin trading. Institutional investors and sovereign funds routinely purchase Bitcoin using stablecoins. Meanwhile, in Japan, Bitcoin adoption is progressing, but a corresponding stablecoin has been missing. This situation is seen not just as corporate competition but as a national issue related to currency issuance rights.

Use Cases Emerging from Pilot Experiments

While specific timelines for issuance are not yet public, multiple use cases are being explored through pilot projects, such as Mitsubishi Corporation’s experiments. Cash management systems (CMS) are a promising candidate.

Global companies hold funds worldwide, but outside business hours, these funds cannot be moved due to cut-off times. As a result, vast amounts of interest-free capital remain idle daily. Utilizing blockchain technology to enable 24/7 operations could significantly improve corporate capital efficiency.

During the pilot phase, multiple use cases, including cross-border remittances, are being tested simultaneously, along with AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) measures.

Role Sharing with JPYC—Incompatibilities and Complementarities

The Japanese yen-denominated stablecoin JPYC, issued in October 2025, appears incompatible with the three-megabank plan at first glance. However, in reality, these two systems could serve complementary roles.

The main strength of the three-megabank plan is its ability to connect with existing financial systems, including direct links to the Zengin System and BOJ Net. Conversely, JPYC covers use cases for small-scale retail payments. Similar to how the jointly operated “Kotorasoukin” app by major banks functions without direct connection to the Zengin System, different solutions are expected to coexist at various layers. This division of labor allows each system to address different scales of payment demand optimally.

New Opportunities from Transition to the Financial Instruments and Exchange Act

The transfer of supervisory authority to the FIEA enables bank subsidiaries to legally engage in crypto asset activities (issuance, trading, brokerage). This marks a structural turning point for the financial industry.

Currently, the formation and offering of crypto asset ETFs are recognized as natural steps. Further, group-wide discussions are underway regarding brokerage and custody services, not just within digital strategy divisions. Challenges such as user protection, volatility management, and system adaptation remain, but addressing these accurately is critical; otherwise, Japan risks falling behind in international competition again.

The principle of self-custody in Web3 services, emphasizing personal responsibility, conflicts with traditional financial practices. To align with Japan’s regulatory environment and user protection standards, decisions must be made on how to reduce the burden of private key management while ensuring security, or whether financial institutions should offer custodial wallets. Designing solutions based on Japanese customer needs, rather than simple imitation of overseas models, is essential.

Tokenization and On-Chainization Transforming Financial Structures

Asset tokenization and on-chainization are not just technological trends but have the potential to fundamentally change banks’ revenue structures. They will bring about profound changes in payments, asset management, and securities trading.

If payments become low-cost, instant, high-frequency, and cross-border, transaction volumes could surpass expectations. As global companies execute instant, large-scale settlements 24/7, computational power and energy consumption will become limiting factors. In such a scenario, breakthroughs like quantum computing will be indispensable.

Tokenizing real assets (RWA) will expand investment options horizontally, fundamentally altering financial markets. Additionally, interbank markets for fund and securities transfers will become more efficient and faster, transforming banking operations themselves.

However, this transformation will not result from a single technological innovation but from the synergistic evolution of multiple technologies. Just as electricity was gradually applied to diverse uses over a century since Edison’s invention of the lightbulb, blockchain infrastructure is being gradually developed. The timespan for this is now measured in 5 to 10-year cycles.

Keywords for 2026—“Programmability” and “Negative Capability”

Iso highlights “around the corner, programmability” as the keyword for 2026. The advent of generative AI and the realization of quantum computing are enabling blockchain’s programmability to finally demonstrate its true potential. The world where AI agents make asset management decisions is no longer a distant future.

Simultaneously, the concept of “Negative Capability”—the ability to continue thinking without rushing to conclusions amid high uncertainty—is emphasized. As AI rapidly spreads and many services become homogeneous, the decisive factor for financial institutions to attract customers will be their ability to “see three or five years ahead,” a capability AI cannot replicate.

Fundamental Transformation of Banks’ Roles and Functions

Bank management environments change dramatically over a decade. Ten years ago, bank counters involved handwritten slips and stamps as standard practice. Today, such scenes have vanished. The way banks operate is already evolving, including collaborations with Starbucks.

While the use of external infrastructure like AI and cloud computing advances, new risks also emerge. Complete cloud adoption is not the answer; hybrid operations combining on-premises and cloud environments are necessary. Recent advances in MCP (Model Context Protocol) technology enable AI to handle these different environments integratively. Developing data strategies and security measures suited to this new era is crucial.

Future banking work will focus on answering “what value can we bring to customers” beyond the convenience and efficiency provided by AI. As smartphones evolve into new forms and financial services are executed via natural language commands to AI agents, the banks that will be chosen are those proactively offering “AI-Ready” services.

However, amid the homogenization driven by AI, the true source of differentiation will be human. The ability to keep thinking about “what might happen next,” to experiment and learn through trial and error—this resilience and foresight will be the core capabilities required of banks in the coming era.

When stablecoins, decentralized finance, and various technological innovations intertwine, entirely new use cases will emerge. Monitoring these changes and continuously thinking will be the most critical factor determining the survival and growth of financial institutions beyond 2026.