Japan will approve yen-backed stablecoins this fall, starting with fintech firm JPYC

Japan will allow the issuance of yen-backed stablecoins for the first time this fall, according to the Financial Services Agency.

The decision paves the way for licensed fintech players to enter the stablecoin arena legally, with Tokyo-based JPYC Inc. registering as a money transfer operator before the end of the month to kickstart the process.

The new framework permits stablecoins pegged to fiat, and this is the country’s first full regulatory approval to do so. The decision arrives as the global stablecoin market, currently valued at over $250 billion, or ¥37 trillion, remains dominated by dollar-backed tokens like USDC and Tether.

Japan wants in on that liquidity, and it’s not doing it for vanity. The push behind this is international remittances, cross-border transactions that the country believes can be faster, cheaper, and more efficient through stablecoins issued under its own currency.

JPYC to use public blockchains and real asset reserves

The JPYC token will maintain a fixed rate of 1 yen per token, backed by actual assets. The company is using a mix of bank deposits and Japanese government bonds to support every coin it issues.

The buying process is straightforward: individuals or businesses can apply for tokens, and after payment is confirmed via bank transfer, the coins are dropped into the customer’s digital wallet.

Unlike many corporate-backed digital tokens, JPYC will not build a new blockchain. Instead, all issuance will happen on existing public chains, and the company has no plans for a proprietary chain at this stage. This keeps the infrastructure open and avoids adding more walled gardens to the crypto ecosystem.

Ryosuke Okabe, a representative from JPYC, posted on X that stablecoins operate like giant vacuums for government bonds, calling them “absorption machines.” He pointed out that dominant issuers like Tether and Circle have already become some of the biggest buyers of U.S. Treasuries, and that JPYC will likely follow that model in Japan.

“It’s no exaggeration to say that the interest rates on Japanese government bonds rest on JPYC’s shoulders,” Okabe said, warning that rising demand for these bonds from stablecoin issuers could be the difference between low-interest loans and costlier mortgages.

Depegging risks remain, and profits stay with issuer

When asked about collateral risk, one user brought up the obvious: what happens if government bond prices fall and the backing value gets hit? Okabe replied that in such a case, the issuer is on the line. “It’s a regulation that if the country collapses, it’s fine for the SC issuer to go down with it,” he said.

The interest margin earned from government bonds also won’t go to holders of the stablecoin. Instead, that profit will stay with the issuer. Interest payments to users are banned, but Okabe said small perks, like those seen in credit card rewards, are allowed.

Okabe also admitted there’s a risk of depegging in secondary markets, especially if the underlying bonds lose liquidity or value. If the stablecoin starts trading below 1 yen in those markets, buyers can still bring it back to JPYC and redeem it for full value, which he says should help bring the price back up quickly.

But he warned that if Japan ever defaults on its own bonds or if bond prices collapse, people may try to dump the token even below face value, and the peg could stay broken for longer until things settle.

To reduce the risk of liquidity shortfalls, JPYC must deposit 101% of the highest issuance value within a week of releasing the stablecoins. That deposit has to be made within three business days, under current regulations.

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