Japan’s Stablecoin Landscape: Regulation, Innovation, and the Road Ahead (part 2/2)

In Part 1, we explored stablecoin trends in Japan and globally, and introduced Japan's regulatory efforts to date regarding cryptocurrencies and stablecoins. In Part 2, we take a closer look at the current state of stablecoins in Japan.

Japan’s First Stablecoin, and Regulatory Progress

Japan's first broadly-defined stablecoin was JPYC, launched in 2021. Legally, JPYC is considered a Prepaid Payment Instrument denominated in Japanese yen. Like a prepaid card, it can be funded in advance and later used to purchase goods and services. The company behind JPYC raised a Series A funding round from investors including Circle, the US-based developer of USDC.

It is referred to as a "broadly-defined stablecoin" because, at the time, stablecoins had not yet been legally defined in Japan—or globally.

A major step occurred in June 2023, when the Payment Services Act was amended to formally regulate stablecoins under the new category of "Electronic Payment Instruments."

Under the law, stablecoins collateralized by fiat currency (e.g: 1 coin = 1 yen) are now considered Electronic Payment Instruments. Issuers are limited to banks, money transfer service providers, and trust companies. Intermediaries are also required to register as Electronic Payment Instrument Trading Businesses. Unbacked stablecoins, such as algorithmic ones, are still treated as crypto assets. Legally, businesses dealing in crypto assets must register as Crypto Asset Exchange Businesses after undergoing review by the Financial Services Agency.

Depending on the issuer, stablecoins are classified into three models: deposit-type (banks), trust-type (corporations utilizing a trust scheme), and registered fund transfer service provider. Fund preservation methods vary depending on the model.

Prior to this amendment to the Payment Services Act in 2023, there was concern that the issuance and redemption of stablecoins in exchange for Japanese yen might be subject to bank-size restrictions, creating a significant barrier for startups. The amendment clarifies the legal basis for stablecoin issuance and redemption. JPYC is currently moving into the phase of aiming to issue a funds transfer business-type stablecoin; compliant with USDC standards.

Furthemore, in March 2025, the Japanese government approved a bill to amend the Payment Services Act, allowing up to 50% of the backing assets of trust-type stablecoins (a type of cryptocurrency in which the backing assets are generally deposited with a third party such as a trust company, and the value of the coin is stabilized through this trust scheme) to be invested in government bonds with a remaining maturity of three months or less, or early-cancellable term deposits. Up to now, the entire amount of backing assets equivalent to the issuance amount had to be held in demand deposits that depositors could withdraw at any time.

Real-World Use Cases and Regional Innovation

In the post-COVID era, examples of cryptocurrencies and NFTs being used in regional revitalization efforts have emerged across Japan.

In Yamakoshi, a small village in Niigata Prefecture with a population of around 800, the community issued the "Nishikigoi NFT," a digital artwork that embodies the concept of an electronic resident registration card. Anyone, not just local residents, can own this NFT.

In 2024, a pilot project was launched in partnership with a Japanese startup to develop a stablecoin-based contactless payment system utilizing the Individual Number Card (informally known as “My Number Card,” a recent form of national financial ID).

Stablecoin’s Future in Japan

This year, SBI Group, one of the country’s largest internet bankers, began offering USDC to Japanese people as Japan’s first registered Electronic Payment Instruments Service Provider.

In addition, the following new laws and regulations were approved by the Cabinet. These legal updates have also paved the way for broader adoption of security tokens, with increased industry activity expected in 2026 and beyond.

• Launch a new regulatory category for intermediaries of stablecoins and crypto services
• Relax trust-type stablecoin reserve requirements
• Empowering regulators to require foreign-licensed providers to hold user assets within Japan

While Japan has been relatively slow to adopt cashless payments up to now, the spread of stablecoins and digital wallets is likely to accelerate this trend. Stablecoin payments have the potential to go beyond existing cashless systems, offering economic benefits for both consumers and businesses. Going forward, more attention will likely be focused on the potential for stablecoins to become the "killer app" of a cashless society.