Japan's Financial Services Agency (FSA) has established the strictest stablecoin regulatory framework in the world through amendments to the Payment Services Act (PSA). Effective from June 2023 with further enhancements in June 2025, the framework restricts the issuance of "digital money-type stablecoins" to only three categories of licensed domestic entities: banks, money transfer service providers, and trust companies. This structural design aims to make a collapse like Terra/Luna impossible within Japan's jurisdiction.
JPYC: The First Fully Compliant Yen Stablecoin
JPYC Co. launched the world's first fully regulated yen-pegged stablecoin in October 2025, operating on Avalanche, Ethereum, and Polygon networks. The token is backed 1:1 by yen and Japanese Government Bonds (JGB) held in reserve, and it charges no transaction fees. Revenue is generated from interest earned on JGB holdings. The company targets a circulation of 10 trillion yen within three years and 60 trillion yen within five years, focusing on cross-border remittances, payments, and Web3 settlements. JPYC obtained a money transfer service license in August 2025, becoming the first issuer approved under the new regime.
Barriers for USD Stablecoins
USDT and USDC face severe restrictions in Japan. Foreign issuers must meet the same user protection and anti-money laundering standards as domestic entities, a threshold most have not crossed. As of early 2026, USDT remains largely delisted from Japanese exchanges. USDC has limited regulated access only through SBI VC Trade under Circle's partnership with SBI Holdings, and it is not widely available to retail users. The yen's dominance in Japan's cash-heavy economy and low demand for dollar-denominated liquidity further reduce the appeal of USD stablecoins, reinforcing the FSA's framework.
Big Banks Enter the Fray
Japan's three largest banks—MUFG, SMBC, and Mizuho—are jointly developing trust-based yen stablecoins through the Progmat platform via proof-of-concept programs. SBI Holdings has announced plans to launch its own yen stablecoin in Q2 2026. As of early 2026, the total yen stablecoin market capitalization stands at approximately $36.6 million—modest compared to global USD volumes but growing in institutional payments and cross-border segments where the Japanese framework functions effectively.
Intermediary Compliance Burdens
Intermediaries buying, selling, custodian, or transferring digital money-type stablecoins must register as "electronic payment instrument exchange service providers." Licensed firms must hold at least 95% of client crypto assets in cold storage, segregate user funds in trust structures, comply with FATF Travel Rule requirements, and enter contractual liability-sharing agreements with issuers covering losses from bankruptcy, cyberattacks, or technical failures. The 2025 PSA amendment introduced a less restrictive category for pure brokers and relaxed some reserve rules for trust-type issuers.
Regulatory Evolution and Outlook
Japan's stablecoin regulation traces back to post-Mt. Gox crypto legislation in 2016, accelerated by the Terra/Luna collapse. JPYC's predecessor launched in 2021 as a prepaid payment instrument, and Hokkoku Bank's regional token Tochika was an early experiment. More bank launches are expected in 2026. JPYC is expanding interoperability through a partnership with Circle and integration with TIS for enterprise payments. While the system moves slowly, favors domestic issuers, and largely excludes global stablecoins, it ensures that every yen-pegged token in circulation has a redemption guarantee, a licensed issuer, segregated reserves, and FSA oversight.