The Future of Japan's Stablecoin Industry

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Japan’s stablecoin market is on the brink of transformation, driven by one of the world’s most forward-thinking regulatory frameworks. Unlike many countries still grappling with uncertainty or restrictive policies, Japan has taken decisive steps to legalize and structure its digital currency ecosystem. With clear legislation under the revised Payment Services Act (PSA) and strong government support for Web3 innovation, the foundation is set for a stablecoin revolution. This article explores Japan’s regulatory approach, key industry players, and the potential impact of yen-backed stablecoins on both domestic and global finance.

Regulatory Clarity Sets Japan Apart

In June 2023, Japan officially implemented amendments to its Payment Services Act, establishing a comprehensive legal framework for stablecoin issuance and related services. This milestone positions Japan among the global leaders in crypto regulation—particularly in the stablecoin space.

👉 Discover how Japan’s regulatory clarity is shaping the future of digital finance.

The revised PSA defines stablecoins as Electronic Payment Instruments (EPIs), provided they are pegged to fiat currency and usable for payments to an indefinite number of recipients. This excludes algorithmic or crypto-collateralized stablecoins like DAI from EPI status, focusing instead on asset-backed models that ensure stability and consumer protection.

Who Can Issue Stablecoins in Japan?

Only three types of licensed entities are permitted to issue regulated stablecoins:

Among these, trust companies are emerging as the most viable issuers due to their alignment with existing financial regulations and ability to hold reserves in trust—a model closely resembling established stablecoins like USDC.

Banks face stricter oversight due to systemic risk concerns, while money transfer providers are limited to transactions under 1 million JPY (~$6,800 USD). These constraints make trust-issued stablecoins the most scalable path forward.

Licensing Requirements: The EPISP Framework

Entities engaging in stablecoin exchange, brokerage, or custody must register as Electronic Payment Instrument Service Providers (EPISP). This requirement enforces strict compliance with anti-money laundering (AML) standards, user fund protection, and transparency.

Despite this clear pathway, no company has yet completed EPISP registration for full-scale stablecoin operations—a gap highlighting early-stage challenges despite regulatory readiness.

Yen-Backed Stablecoins: Current Projects and Potential

With regulation in place, several pioneering projects are testing the waters of Japan’s yen-denominated stablecoin landscape. Each reflects different strategies and levels of compliance.

JPYC: Bridging Prepaid Tools and True Stablecoins

Launched in 2021, JPYC was Japan’s first yen-pegged digital token. However, it currently operates as a prepaid payment instrument, not a legally recognized EPI under the PSA. This means users can load JPY into JPYC but cannot redeem it back into fiat—a major limitation.

To evolve into a true stablecoin, JPYC is pursuing:

Its integration with Circle’s infrastructure could significantly boost interoperability, especially in cross-border payments where speed and low cost matter.

Tochika: A Local Digital Currency with National Ambitions

Developed by Kitakami Bank, Tochika is Japan’s first deposit-backed digital currency. It allows account holders to convert deposits into digital tokens usable at local merchants in Ishikawa Prefecture.

Key features:

While currently regional, Tochika plans to expand nationwide by linking with other banks and enabling peer-to-peer transfers—potentially serving as a blueprint for localized digital currencies across Japan.

GYEN: An Offshore Yen Stablecoin Seeking Domestic Entry

Issued by GMO Trust, a subsidiary based in New York, GYEN is a yen-pegged stablecoin regulated under New York State’s financial laws. It trades on major exchanges like Coinbase but cannot be distributed within Japan due to regulatory misalignment.

Though not compliant with Japan’s current framework, GYEN remains significant:

Regulators are reportedly evaluating whether offshore stablecoins like GYEN can meet domestic requirements—opening doors for global interoperability.

Is a Viable Stablecoin Business Model Possible in Japan?

Despite strong regulatory groundwork, real-world adoption remains limited. Over a year after legalization:

One major hurdle is the requirement that all stablecoin reserves be held in non-interest-bearing demand deposits. With Japan’s short-term interest rate at just 0.25%, profitability is challenging. In contrast, U.S.-based issuers earn yield by investing in Treasury bonds—giving them a competitive edge.

👉 Explore how yield-bearing reserve models could transform Japan’s stablecoin economics.

This has sparked calls for regulatory evolution—particularly allowing reserves in low-risk assets like Japanese government bonds (JGBs). Such a shift would improve issuer margins and incentivize large institutions like MUFG, Sony, and DMM Group to enter the market confidently.

Global Implications of Japanese Stablecoins

Japan’s push into stablecoins isn’t just about modernizing payments—it’s part of a broader strategy to strengthen the yen amid persistent weakness. By creating scalable, efficient digital versions of the yen, Japan aims to:

Yen-backed stablecoins could play a crucial role in trade finance, remittances, and even central bank digital currency (CBDC) interoperability. As real-world asset (RWA) tokenization gains momentum, Japan is well-positioned to lead in asset-backed digital finance.

👉 Learn how tokenized assets are redefining financial markets worldwide.

Frequently Asked Questions (FAQ)

Q: Are stablecoins legal in Japan?
A: Yes. Since June 2023, stablecoins backed by fiat currencies like the yen are legal under the revised Payment Services Act, provided they are issued by authorized entities such as banks or trust companies.

Q: Can I buy USDT or USDC in Japan?
A: While some platforms may offer them, USDT and USDC are not classified as EPIs under Japanese law and cannot be officially distributed as payment instruments within the country.

Q: What prevents banks from issuing stablecoins freely?
A: Banks are subject to strict financial stability mandates. Regulators are cautious about unregulated or permissionless models that could pose systemic risks, requiring careful oversight before full participation.

Q: Why hasn't any company registered as an EPISP yet?
A: The process involves rigorous compliance checks. Combined with low reserve yields and unclear monetization paths, many firms are waiting for regulatory refinements before committing.

Q: Could Japanese stablecoins go global?
A: Absolutely. With strong legal backing and integration potential via partnerships with firms like Circle, yen-based stablecoins could become key players in Asia-Pacific trade and remittance corridors.

Q: Will interest-bearing stablecoins be allowed in Japan?
A: Not currently. Reserves must be held in demand deposits. However, there is growing industry pressure to allow low-risk investments like JGBs to improve sustainability.

Core Keywords:

Japan’s journey toward a mature stablecoin ecosystem is still unfolding—but with solid legal foundations and growing institutional interest, the next phase promises meaningful progress.