Japan's NEC Is Exploring Stablecoin Payments on Avalanche. Could That Help AVAX Recover From a 22% Monthly Drop? - 24/7 Wall St.

Japan's NEC, a leader in biometric identity systems operating in more than 70 countries, is looking to enable stablecoin payments on the Avalanche blockchain. The goal is to streamline the process so that a shopper's identity verification and stablecoin payment can be completed in a single approval. This effort follows a memorandum of understanding (MOU) NEC and Ava Labs signed in July, which allows them to explore the partnership further.

However, the announcement did not provide any financial details, a launch date, or specify which stablecoin would be used. According to Avalanche, the two companies are collaborating to create a framework for biometric-verified blockchain services, suggesting the project is still in the exploration stage, with no pilot program or live service in place.

Limited Details on Deal

NEC, a prominent Japanese IT and electronics firm specializing in biometric security and digital identity, is credited with over 1,000 biometric identity systems worldwide. Ava Labs is the primary development team behind Avalanche. However, neither company disclosed the deal's potential value, who will bear the costs, or what revenue they anticipate.

The technical aspects are a bit clearer. Along with the MOU, both companies released a white paper outlining an Avalanche-based system that integrates identity checks with stablecoin payments. Importantly, the biometric data itself will remain off the blockchain, while only proof of identity verification will be recorded.

AVAX Excluded from Payments

One notable gap in this initiative is the payment mechanism—the asset used to settle transactions hasn't been named. Potential candidates include JPYC, a yen stablecoin, as well as a dollar-pegged stablecoin or a bank-backed yen token, while AVAX would serve as the network facilitating the service.

AVAX can gain traction in two main ways: it can be used to pay transaction fees and secure the network through staking, where holders lock up their tokens to help validate transactions in exchange for rewards. However, because stablecoin checkout primarily impacts AVAX through minor network fees, and because no specific figures on fees, volume, or staking are disclosed, it's difficult to gauge potential demand.

Previous Partnerships Didn't Boost Price

Despite previous announcements, AVAX's price hasn't rebounded. For example, the Dubai International Financial Center Courts began recording court orders on Avalanche on October 14, but court paperwork brings in very little in transaction fees.

The recent announcement regarding Japan's tax refund program is a more concrete test of demand since it specifies the payment asset. On October 29, Avalanche revealed that Japan Tax Free, JPYC, and UPBOND would allow tourists to receive refunds in JPYC, a yen stablecoin, starting November 1. Interestingly, that same day, AVAX hit its lowest price in the past month.

Recovery Prospects Unclear

For now, the answer appears to be no. NEC stands to gain a new identity-verification product and a potential showcase for tourist payments, while Ava Labs benefits from a well-known partner for promotion. AVAX will only see a boost if these payment initiatives come to fruition and generate sufficient demand for transaction fees and staking. As it stands, the MOU does not guarantee any of this.

To erase its losses from October, AVAX would need to see a 30% increase to reach $11.09, where it stood on October 4, significantly higher than its 20-day average of $9.20. The most significant indicator for AVAX holders will be any announcements about a specific stablecoin, a partnering merchant, or a pilot program launch date. If such updates are made, it could change the outlook for AVAX.