Japan’s Financial Services Agency (FSA) has delivered the first fully regulated yen-pegged stablecoin, JPYC, in October 2025, capping years of deliberate regulatory architecture. The framework, built through amendments to the Payment Services Act (PSA), imposes some of the strictest stablecoin rules globally.
Who Can Issue: Banks, Fund Transfer Firms, Trust Companies
Only three types of licensed domestic entities qualify to issue “digital-money type stablecoins”: banks, fund transfer service providers, and trust companies. Each carries distinct reserve requirements. Banks treat stablecoins as deposits covered by Japan’s deposit insurance system; fund transfer providers back tokens with money deposits, bank guarantees, or entrusted safe assets including JGBs; trust companies hold all trusted assets as bank deposits, with up to 50% allowed in low-risk short-term instruments after 2025.
JPYC secured a fund transfer service provider license in August 2025 and launched its yen token on Avalanche, Ethereum, and Polygon. The token is fully backed 1:1 by yen reserves and charges zero transaction fees, generating revenue from JGB interest. The company targets 10 trillion yen in circulation within three years and 60 trillion yen within five years, focusing on remittances, payments, and cross-border Web3 settlements.
Dollar Stablecoins Hit a Wall
USDT and USDC dominate 97–99% of the global stablecoin market, but hold a tiny fraction in Japan. Foreign issuers must meet the same user protection and AML standards as domestic entities, a bar rarely cleared. As of early 2026, USDT is largely restricted on Japanese platforms, while USDC has limited regulated access via SBI VC Trade under a partnership with Circle. The preference for yen-denominated digital assets also reflects Japan’s cash-heavy economy and existing yen usage in regional trade.
Big Banks Move In
Japan’s three largest banks—MUFG, SMBC, and Mizuho—are jointly developing trust-type yen stablecoins through the Progmat platform. SBI Holdings plans to launch a yen stablecoin in Q2 2026. Total JPY stablecoin market cap stands at approximately $36.6 million as of early 2026, modest but growing in institutional and cross-border payment segments.
Intermediaries Face Strict Rules
Firms buying, selling, or custodying digital-money type stablecoins must register as Electronic Payment Instrument Exchange Service Providers. Requirements include holding at least 95% of customer crypto assets in cold storage, segregating user funds in trust structures, complying with FATF Travel Rule, and entering liability-sharing agreements with issuers covering losses from bankruptcy, hacks, or technical failures. The 2025 PSA Amendment Act introduced a lighter category for pure brokers and relaxed some reserve rules for trust-type issuers. The FSA is also reviewing whether certain crypto assets should shift from PSA oversight to the Financial Instruments and Exchange Act.
Japan’s early regulatory history, shaped by the 2014 Mt Gox collapse, laid the groundwork. The 2016 PSA amendments required exchange registration, asset segregation, and AML compliance. Stablecoins were then nonexistent. JPYC’s predecessor launched in 2021 as a prepaid instrument, and Hokkoku Bank’s Tochika token were early experiments. The current framework deliberately sacrifices speed and foreign participation in exchange for redemption guarantees, licensed issuers, segregated reserves, and FSA oversight. More bank launches are expected in 2026, and JPYC is expanding interoperability via a Circle partnership and TIS integration for enterprise payments.