Japan’s megabanks and fintechs race to issue regulated yen-pegged stablecoins

The stablecoin competition is heating up in Japan as the nation’s three megabanks, Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho announced plans to issue a common-standard yen and dollar-pegged stablecoin for corporate payments.

The group, which collectively serves more than 300,000 major clients, aims to roll out tokens within this fiscal year after conducting trial transfers within the Mitsubishi Corporation, which operates some 240 companies under its umbrella.

Japan overhauled its Payment Services Act (PSA) in 2023 to permit only licensed banks, trust companies, and registered funds-transfer businesses to issue stablecoins, creating one of the world’s strictest frameworks.

JPYC wins Japan’s first stablecoin license

The amendment effectively froze the market for two years until fintech startup JPYC broke through on August 18, becoming the first to be granted a Funds Transfer Service Provider (FTSP) license and the country’s first issuer of a yen-denominated stablecoin.

The fintech startup met the legal requirements to ensure the tokens are redeemable 1:1 for Japanese yen and are backed by secure assets, primarily bank deposits and government bonds.

The startup’s success as Japan’s official stablecoin issuer defied assumptions that only major banks would secure approval. JPYC CEO Noritaka Okabe said the licensing framework was never designed with startups in mind.

The application process, he said, is so demanding that even banks undergo scrutiny equivalent to founding a new financial institution. For most startups, he added, the smarter strategy is to leverage stablecoins within existing operations rather than seeking to issue them independently.

Japan relaxes collateral rules

​​Crucially, a 2025 amendment to the PSA relaxed reserve rules, allowing issuers to hold up to 50% of backing assets in low-risk instruments like short-term government bonds and fixed-term deposits, moving past the prior demand-deposit mandate. The revision is designed to make stablecoin issuance commercially sustainable without compromising liquidity safeguards. It allows issuers such as JPYC to earn modest interest on reserves.

This amendment represents a pioneering yet controlled leap into a stablecoin era. Nomura Research Institute (NRI) Senior Economist Takahide Kiuchi told Cryptopolitan that Japan’s regulatory framework reflects concerns that issuers with low creditworthiness could undermine trust in stablecoins.

“While this could potentially hinder the spread of stablecoins and weaken Japan’s international competitiveness, Japanese consumers generally prefer stablecoins issued by highly credible institutions such as banks. The regulation isn’t likely to become a major obstacle to the adoption of stablecoins in Japan.”

Century-old legal system still shapes payment system

Japan’s reliance on bank-issued money reflects a century-old legal framework that still dictates how financial innovation unfolds. In 2022, Yasuyuki Fuchita from Nomura Institute of Capital Markets Research criticized Japan’s PSA as restricting non-bank payment innovation. He said the country’s payments regime is built on a Meiji-era (1868 – 1912) legal concept that treats money transfers as the sole domain of banks. This legacy mandates that fintechs and stablecoin issuers partner with licensed institutions today.

The same legacy underpins Japan’s emphasis of regulatory precision over speed in areas like real-time reserve disclosures. NRI Senior Economist Takahide Kiuchi points out that Japan’s reserve reporting rules are less stringent compared to the newly formulated rules in the United States. Under Japan’s Financial Services Agency (FSA) supervision, stablecoin issuers must file quarterly reports outlining reserve types, custody locations, and segregation measures.

“While Japan’s management structure is strict, it does not provide real-time monitoring of reserves. Compared with the monthly disclosures required under the U.S. GENIUS Act, the reporting frequency is also lower.”

Stablecoins slash cross-border costs and settlement time

Stablecoins are projected to make international remittances significantly cheaper. A recent KPMG report highlights how stablecoins have the potential to shrink cross-border settlement durations from several days down to seconds, also cutting transaction expenses by up to 99%.

The yen-pegged stablecoin will be subject to a regulatory cap of one million yen (approximately $6,600) per client, per business day for issuance and redemption. But doesn’t restrict how much can be held or transferred between wallets.

JPYC CEO Noritaka Okabe said the appeal of stablecoins lies in bypassing Japan’s slow and paper-based remittance process. Another benefit of the blockchain is that it doesn’t close. It aims to expand into trade and international settlements once regulatory caps are lifted. The startup has set a three-year issuance target of one trillion yen ($6.81 billion).

With fintechs and banks now testing regulated stablecoins, Japan’s digital payments landscape is entering a new phase of experimentation and scale. The flurry of development could position the nation’s DeFi to compete globally among next-generation cross-border settlement networks.

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