A New Era for Japanese Stablecoins: JPYC Approved - Balancing Regulation and Application

At the WebX Fintech EXPO held last Friday in Osaka, panel members discussed Japan's evolving stablecoin landscape, highlighting the gap between regulatory progress and practical applications. Attendees included Akio Isowa from Sumitomo Mitsui Financial Group, Tatsuya Saito, CEO of Progmat, and Kenta Sakakibara, manager of Circle Japan, with the moderator being Kenta Sakagami, COO and CFO of DeFimans.

Japan and the United States: A Comparison of Stablecoin Regulatory Approaches

Japan's financial industry is increasingly interested in stablecoins, which are digital currencies pegged to fiat currencies at a 1:1 ratio. On August 19, the Financial Services Agency of Japan approved the country's first yen-backed stablecoin, JPYC, which is set to be officially issued this fall. However, regulatory measures have been in place since 2022, giving Japan a first-mover advantage. In contrast, certain U.S. stablecoins have been widely adopted prior to federal legislation. In July, the U.S. Congress passed the GENIUS Act, signed by the President, establishing a regulatory framework for issuers, including federal oversight for those with issuance volumes exceeding $10 billion.

Sakakibara emphasized three main differences:

Isowa pointed out, "In the United States, the combined issuance of certain stablecoins amounts to 30-40 trillion yen, thanks to higher short-term government bond yields. Japan's low yields limit growth opportunities." He also emphasized the challenges of anti-money laundering: "Banks manage anti-money laundering, but for stablecoins, the issuers must ensure compliance themselves, which remains a key issue."

Challenges Faced by Stablecoin Providers

Tatsuya Saito, the CEO of Progmat, a digital asset infrastructure platform jointly established by Japan's major banks, discussed operational hurdles. He explained: "The regulatory impact may vary slightly depending on whether the provider is a bank or a cryptocurrency-related company."

He further explained: "Retail transactions rarely exceed 1 million yen, but banks handling wholesale transfers for corporate or institutional clients face stricter regulations. Ensuring compliance across all scenarios remains a challenge."

Market potential and global chain reaction

The attendees unanimously agreed that the launch of JPYC as Japan's first yen-backed stablecoin represents an important milestone. Sakakibara explained Circle's strategy: "We launched the USDC business in Japan at the end of March. The market has already shared some use cases, including shifting wholesale international payments and treasury management to stablecoins. We see strong demand in the market for yen-backed tokens and expect the GENIUS Act to have a positive spillover effect on Japan's ecosystem."

Japan's experience in QR code cashless payments since the late 2010s provides a reference for the potential applications of stablecoin. Isowa stated: "Initially, various QR code payment systems confused consumers, but interoperability has improved. Stablecoins may follow a similar path. Early coordination on which tokens to adopt is crucial."

He added that wholesale banking could benefit from internal stablecoins: "Multinational companies pool funds through cash management systems, but time zone differences can cause delays in transfers. Stablecoins can enable instant liquidity, improving efficiency and labor productivity."

The advantages of stablecoins compared to cashless systems

Saito emphasized the technical advantages: "Current cashless payments are isolated in each merchant's database, hindering interoperability. Stablecoins built on shared standards allow for easy exchange between different tokens."

He predicts market consolidation: "Initially, there will be multiple stablecoins, but over time, they will tend to merge."

Saito concluded: "The issuance of the 'GENIUS Act' and JPYC has sounded the alarm for the Japanese financial industry. Now, ignoring stablecoins is a greater risk than participating in them."