Japan Launches World’s First Yen Pegged Stablecoin

Regulatory Milestone Sets Global Precedent

JPYC Inc. achieved a critical regulatory breakthrough in August 2025 when it became the first institution registered as a “fund transfer service provider” with the Kanto Local Finance Bureau under Article 37 of Japan’s Payment Services Act. This registration authorizes the company to issue electronic payment instruments—digital tokens pegged one-to-one with the Japanese yen.​

The approval reflects Japan’s comprehensive stablecoin framework established through amendments to the Payment Services Act that took effect on June 1, 2023. These regulations restrict stablecoin issuance to banks, trust banks, and licensed wire transfer providers, creating one of the world’s most robust consumer protection frameworks. The rules mandate full reserve backing, guaranteed redemption rights, and regular transparency reporting.​

How JPYC Works: Reserve Structure and Blockchain Integration

JPYC maintains its stability through a dual-reserve system combining Japanese yen deposits with Japanese Government Bonds (JGBs). This structure provides 100% backing for all issued tokens, ensuring each JPYC can be redeemed for exactly one yen. The reserve assets undergo regular oversight by the Financial Services Agency.​

The stablecoin operates across three major blockchain networks—Ethereum, Avalanche, and Polygon—enabling multi-chain functionality and low-cost cross-border transactions. Japanese citizens can purchase JPYC through the dedicated JPYC EX platform after completing identity verification using their My Number card.​

To accelerate adoption, JPYC has implemented fee-free transactions during the initial launch phase. The company will generate revenue from interest earned on its Japanese Government Bond holdings rather than charging users transaction fees.​

Ambitious Growth Targets and Business Adoption

JPYC Inc. has set an ambitious circulation target of 10 trillion yen ($65.4 billion) within three years. While this represents significant growth potential, it pales in comparison to USDT, the world’s largest stablecoin, which currently maintains approximately $183.2 billion in circulation.​

Several major Japanese businesses have announced plans to integrate JPYC into their operations. Densan System is developing payment systems for retail stores and e-commerce platforms incorporating the stablecoin. Asteria plans to add JPYC functionality to its enterprise data integration software serving over 10,000 companies. Crypto wallet provider HashPort has also committed to supporting JPYC transactions.​

Banking Giants Launch Competing Initiative

Japan’s three largest banks—Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Bank—are simultaneously developing their own yen-pegged stablecoin through MUFG’s Progmat platform. The consortium plans to launch on October 31 for corporate settlements.​

This collaboration represents massive institutional commitment. The three megabanks collectively serve over 300,000 corporate clients and maintain relationships with more than 600,000 NetStars payment terminals. Mitsubishi Corporation will serve as the first corporate user, implementing the stablecoin across its 240 global subsidiaries for international transfers.​

The Progmat platform supports stablecoin issuance across multiple blockchain networks including Ethereum, Polygon, Avalanche, and Cosmos. The banks have formed strategic alliances with cryptocurrency sector players including domestic exchange Bitbank and blockchain firm Ava Labs.​

Central Bank Recognizes Stablecoin Potential

Bank of Japan Deputy Governor Ryozo Himino recently emphasized stablecoins’ transformative potential. Speaking at the 2025 GZERO Summit Japan, Himino stated that “stablecoins might emerge as a key player in the global payment system, partially replacing the role of bank deposits”. He urged regulators to “modernise international prudential standards to keep up with the new and emerging realities”.​

Himino’s remarks underscore the strategic importance of Japan’s regulatory leadership. While the United States passed the GENIUS Act in July 2025 and the European Union implemented its MiCA Regulation, Japan’s 2023 Payment Services Act amendments positioned the country as a regulatory pioneer.​

Challenges in a Cash-Loving Nation

Despite Japan’s technological sophistication, the country has historically favored cash transactions. However, digital payment adoption has accelerated dramatically. The ratio of cashless payments rose from 13.2% in 2010 to 42.8% in 2024, exceeding the government’s original target. Total cashless transactions reached 141 trillion yen (approximately $937 billion) in 2024.​

Nevertheless, experts caution that stablecoin adoption faces headwinds. Tomoyuki Shimoda, a former Bank of Japan executive, predicted it would take two to three years for yen stablecoins to achieve widespread adoption. He noted fundamental differences from dollar-pegged stablecoins, which benefit from the U.S. dollar’s global dominance.​

Professor Sayuri Shirai of Keio University highlighted that Japanese consumers already enjoy diverse digital payment options from PayPay to Apple Pay. In a country where nearly one-third of citizens are over 65, many remain content with existing payment methods.​

Global Context: Dollar Dominance Continues

The launch occurs amid overwhelming U.S. dollar dominance in the global stablecoin market. Dollar-backed stablecoins account for approximately 99% of total stablecoin market capitalization, which reached around $255 billion in early 2025. This concentration reflects the dollar’s continued supremacy in international payments.​

Market analysts project stablecoin supply could surge from $230 billion in 2025 to $2 trillion by the end of 2028. For non-dollar stablecoins like JPYC, the competitive landscape remains challenging given powerful network effects benefiting dollar-based alternatives.​

Looking Ahead

The success of JPYC will depend on user adoption rates among both retail consumers and corporate clients. Integration with existing financial infrastructure, including bank accounts and payment terminals, will be essential for mainstream acceptance. As Japan pioneers regulated yen-backed stablecoins, the world watches closely to see whether this model can compete in a dollar-dominated digital currency landscape.​

_{Source: This article is based on reporting from Reuters, with additional information from cryptocurrency and financial news sources covering Japan’s stablecoin developments.​}