On August 18, Nikkei reported that Japan’s Financial Services Agency (FSA) is set to approve the issuance of the country’s first yen-backed stablecoin as early as this autumn, aiming to use it in areas such as international remittances.
Tokyo-based fintech firm JPYC Inc. will register as a money transfer business operator within this month. Data provided by the Financial Times on July 28 shows that the value of stablecoins in global circulation has increased to approximately $250 billion, most of which are pegged to dollar-denominated assets.
Stablecoins are based on blockchain technology. Dollar-backed stablecoins require at least 1:1 reserve asset support, which can include US dollars, demand deposits, US Treasury bonds, etc. Legal revisions effective in Japan in June 2023 define stablecoins as "domestic currency-denominated assets," distinguishing them from other cryptocurrencies and allowing banks, trust companies, and money transfer businesses to issue such currencies.
The new yen-backed stablecoin will be named JPYC, with 1 JPYC fixed at 1 yen (approximately 0.05 Chinese yuan), backed by highly liquid assets such as yen deposits and Japanese government bonds. Individuals, businesses, and institutional investors can apply to purchase JPYC stablecoins and make payment transfers, after which the stablecoins will be deposited into their e-wallets. Use cases include remittances to overseas students, corporate payments, and blockchain-based asset management services.
According to Nikkei, the project plans to issue 1 trillion yen (48.7 billion Chinese yuan) worth of JPYC stablecoins within three years.
In a recent post on social media X, Mr. Okabe (phonetic), a representative of JPYC Inc., stated that yen-backed stablecoins could significantly impact Japan’s bond market. He noted that issuers of dollar-backed stablecoins have become major buyers of US Treasury bonds, using them as collateral for circulating tokens. For example, Tether (USDT) and USD Coin (USDC) primarily allocate funds to US Treasury bonds.
Okabe hinted that if JPYC gains widespread adoption, Japan could see a similar trend, boosting demand for Japanese government bonds. "It is highly likely that JPYC will start purchasing Japanese government bonds in large quantities in the future."
On June 24, the Bank for International Settlements (BIS) warned that decentralized stablecoins "perform poorly" as widely usable currencies. In its annual economic report released that day, the BIS stated that such stablecoins have three major flaws: first, they lack central bank backing; second, they lack sufficient safeguards against illegal use; and third, they do not offer the financial flexibility to generate loans.
