The Financial Services Agency of Japan, or FSA, has paved the way for JPYC, a fintech firm based in Tokyo, to launch its first domestically issued stablecoin pegged to the yen.

This marks a significant milestone since Japan established regulatory guidelines for domestic stablecoins last year. Before issuing tokens, JPYC must register as a money transfer business.

Each token is intended to hold a one-to-one value with the Japanese yen and will be supported by reserves including commercial bank deposits and Japanese government bonds. The firm plans to distribute this stablecoin via bank transfers, enabling both individuals and businesses to purchase and store tokens in digital wallets.

Implications for the bond market

Representatives from JPYC argue that their new currency could influence Japan’s bond market. They point out that in the United States, issuers of stablecoins have become significant buyers of U.S. Treasuries to secure their tokens. A similar phenomenon in Japan might increase demand for Japanese government bonds as yen-based stablecoins gain popularity.

Moreover, governments that fail to develop stablecoin markets may face higher borrowing costs due to missing out on new sources of demand for sovereign debt. The approval of JPYC’s stablecoin is thus seen not just as a step toward regulating digital assets but also part of broader financial policy discussions in Japan.

The global stablecoin market has grown rapidly, now exceeding USD 286 billion, with dollar-backed tokens like Tether’s USDT and Circle’s USDC dominating. While US dollar-stablecoins are already available in Japan, JPYC would be the first option denominated in yen.

In earlier news, Circle received FSA approval to introduce USDC via SBI VC Trade, an exchange run under SBI Holdings. This marked the first time a foreign-issued stablecoin was approved for use in Japan, with plans to extend availability to additional Japanese platforms.