Japan’s Stablecoin Progress: Regulation Leads, Adoption Lags

At the WebX Fintech EXPO held in Osaka last Friday, panelists discussed Japan’s evolving stablecoin landscape, emphasizing the gap between regulatory progress and practical adoption.

Participants included Akio Isowa of Sumitomo Mitsui Financial Group, Tatsuya Saito, CEO of Progmat, and Kenta Sakakibara, Circle’s Japan Manager, moderated by Kenta Sakagami, COO/CFO of DeFimans.

Japan and US: Contrasting Approaches to Stablecoin Regulation

Japan’s financial sector is witnessing growing interest in stablecoins, a digital currency pegged 1:1 to fiat. On August 19, Japan’s Financial Services Agency approved JPYC, the country’s first yen-backed stablecoin, scheduled for formal issuance this fall. Regulatory oversight, however, has been in place since 2022, giving Japan a first-mover advantage.

By contrast, US stablecoins like Tether’s USDT and Circle’s USDC were widely adopted before federal legislation. The GENIUS Act, passed by Congress and signed by the President in July, now establishes a regulatory framework for issuers, including federal oversight for issuances exceeding $10 billion—USDC alone issues $67 billion and falls under the Office of the Comptroller of the Currency.

Sakakibara of Circle highlighted three key differences:

• Japan introduced pioneering stablecoin regulations in 2022, serving as a reference for other countries.
• US legislation now subjects large issuances to federal supervision.
• Transaction caps differ, with Japan limiting transfers to ¥1 million, contrasting sharply with the US.

Isowa noted, “In the US, the combined issuance of Tether and Circle totals ¥30–40 trillion, fueled by higher short-term government bond yields. Japan’s low yields limit growth opportunities.” He also emphasized anti-money laundering challenges: “Banks manage AML, but with stablecoins, issuers must ensure compliance themselves, which remains a critical issue.”

Challenges for Stablecoin Providers

Tatsuya Saito, CEO of Progmat, a platform for digital asset infrastructure co-founded by major Japanese banks, discussed operational hurdles. “Depending on whether a provider is a bank or a crypto-adjacent company, regulatory impacts vary subtly,” he explained.

He elaborated, “Retail transactions rarely exceed ¥1 million, but banks handling wholesale transfers for corporations or institutional clients face stricter rules. Ensuring compliance across all scenarios remains a challenge.”

Market Potential and Global Ripple Effects

Panelists agreed that JPYC’s launch as Japan’s first yen-backed stablecoin represents a significant milestone. Sakakibara explained Circle’s strategy: “We began USDC operations in Japan at the end of March. The market has shared use case ideas, including moving wholesale international payments and treasury operations onto stablecoins. We see strong demand for yen-backed tokens and expect positive spillovers from the GENIUS Act to Japan’s ecosystem.”

Japan’s experience with QR-code cashless payments since the late 2010s informs potential stablecoin adoption. Isowa remarked, “Initially, multiple QR payment systems created consumer confusion, but interoperability has improved. Stablecoins will likely follow a similar path. Early coordination on which tokens to adopt is crucial.”

He added that wholesale banking could benefit from internal stablecoins: “Global companies pool funds via cash management systems, but time-zone differences delay transfers. Stablecoins enable instant movement, boosting efficiency and labor productivity.”

Stablecoin Advantages Over Cashless Systems

Saito highlighted technical benefits: “Current cashless payments are siloed per merchant database, preventing interoperability. Stablecoins, built on shared standards, allow easy exchange between different tokens.”

He predicted market consolidation: “Initially, multiple stablecoins will emerge, but they will converge over time.” Saito concluded, “The GENIUS Act and JPYC’s issuance are wake-up calls for Japan’s financial sector. Ignoring stablecoins now carries a greater risk than engaging with them.”

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