Why Yen‑Backed Stablecoins Are Central to Japan’s Crypto Road‑Map
Tokyo – Japan is positioning the Japanese yen as a cornerstone of its emerging on‑chain financial ecosystem. With the world’s fourth‑largest economy and the third‑most‑held currency in global foreign‑exchange reserves, the yen’s transition to blockchain‑native assets could reshape both domestic crypto activity and the broader international market.
A Currency Built for Global Funding
The yen’s prominence stems largely from the “carry trade” that has long been a staple of global finance. Because Japanese interest rates have hovered near zero for decades, investors can borrow yen cheaply, convert the funds into higher‑yielding assets abroad, and profit from the spread. According to the International Monetary Fund, the yen accounts for roughly 5.8 % of worldwide FX reserves, trailing only the U.S. dollar and the euro.
Recent moves by the Bank of Japan—raising rates from a negative‑0.1 % to 0.1 % in March 2024 and later to 0.25 %—have already reverberated through equity and crypto markets, underscoring how sensitive global capital is to changes in Japan’s funding costs.
Government and Conglomerate Backing
Since the election of Prime Minister Sanae Takaichi in October 2025, the ruling Liberal Democratic Party (LDP) has articulated a clear ambition: to make Japan a hub for Web 3 technologies. A white paper released by the LDP in April 2024 lists stablecoins and security tokens among eleven immediate crypto‑policy priorities, alongside proposals for income‑tax reform.
Financial conglomerates are already aligning with that vision. SBI Group, led by former Nomura executive Yoshitaka Kitao, has placed tokenised equities and real‑world assets at the core of its blockchain strategy. Through its Strium layer‑1 protocol, co‑developed with Startale Group, SBI aims to provide a settlement layer for institutional on‑chain trading.
Startale’s CEO, Sota Watanabe, emphasizes that true on‑chain securities—those that can distribute dividends and grant voting rights—require a regulator‑approved, bank‑backed stablecoin. Without a fiat‑pegged digital currency, on‑chain dividend payouts would remain impossible.
The Case for a Yen‑Stablecoin
A yen‑denominated stablecoin would extend the traditional carry trade into decentralized finance (DeFi). In practice, an investor could:
- Borrow a yen‑stablecoin at Japan’s low rates.
- Use that stablecoin as collateral to obtain a U.S.‑dollar stablecoin.
- Deploy the dollar‑stablecoin in DeFi protocols—lending, liquidity provision, or yield‑generating strategies.
Because blockchain transactions settle 24 / 7, the process could occur instantaneously, removing the two‑day lag that currently hampers cross‑border carry trades due to non‑overlapping business hours.
Startale announced JPYSC, a yen‑backed stablecoin slated for a second‑quarter launch, explicitly designed to facilitate on‑chain carry trades. Watanabe predicts that, once the token is underwritten by a trustworthy bank, “global investors and institutions will be able to execute the yen carry trade on‑chain, anytime, anywhere.”
Market Liquidity and Competition
Japan already hosts JPYC, a yen‑pegged token used primarily for payments. However, its market cap of roughly $20 million is insufficient for large‑scale borrowing or for supporting deep DeFi liquidity pools.
Three of Japan’s mega‑banks—Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho—are reportedly exploring a joint issuance of a higher‑liquidity yen stablecoin. If realised, such a token could provide the depth required for institutional carry‑trade volumes and entice sizable DeFi participants.
Regulatory Landscape
The introduction of a bank‑backed stablecoin raises several regulatory questions:
- Balance‑sheet Treatment: Japanese authorities have yet to define how stablecoins will be accounted for on bank statements.
- Capital Requirements: The U.S. Securities and Exchange Commission (SEC) is revising capital rules for broker‑dealers handling stablecoins, dropping required haircuts from 100 % to 2 %. Similar guidance may influence Japanese policy.
- Security Token Compliance: For on‑chain equities to distribute dividends or voting rights, regulators must license or certify the stablecoin infrastructure.
Watanabe acknowledges that approvals are still pending and that dialogue with both Japanese officials and U.S. financial institutions is ongoing.
Retail Outlook and Tax Reform
Retail crypto adoption in Japan lags behind its institutional potential, partly due to a steep tax regime that can levy up to 55 % on crypto gains. The government is considering reclassifying crypto assets as financial products, which would lower the tax burden to 20 % and pave the way for crypto exchange‑traded funds (ETFs). The reform is expected to take effect around 2028, though industry leaders argue that an earlier rollout—by 2027—would be necessary to keep pace with the United States’ rapid on‑chain finance expansion.
Analysis & Outlook
- Strategic Fit: The yen’s low‑cost funding advantage dovetails neatly with DeFi’s appetite for arbitrage and yield generation. A robust, bank‑backed stablecoin could unlock a new class of on‑chain carry‑trade strategies.
- Institutional Appetite: Preliminary interest from major U.S. financial players suggests that cross‑border on‑chain financing could become a reality, provided the stablecoin achieves sufficient scale and regulatory clearance.
- Liquidity Hurdle: Existing yen‑stablecoins are too small to service large‑scale borrowing; a collaborative effort among Japan’s leading banks could create the necessary depth.
- Regulatory Timing: The speed at which Japanese regulators clarify stablecoin accounting, capital, and security‑token rules will be decisive. Delays could cede the competitive advantage to jurisdictions with clearer frameworks.
- Retail Participation: Tax reform will be a key driver for broader consumer involvement, expanding the domestic market for on‑chain yen assets beyond institutional actors.
Key Takeaways
- Yen’s Global Role: The currency’s share of FX reserves and its historic use in carry trades make it an attractive on‑chain funding source.
- Stablecoin as Enabler: A bank‑backed yen stablecoin bridges fiat liquidity with DeFi, allowing instantaneous, 24/7 carry‑trade execution.
- Institutional Momentum: SBI, Startale, and potentially the nation’s three largest banks are actively developing yen‑pegged tokens.
- Regulatory Uncertainty: Approval processes and accounting standards for stablecoins remain unsettled, representing both a risk and an opportunity.
- Retail Gap: High tax rates suppress retail crypto activity; upcoming tax reforms could broaden participation once the stablecoin ecosystem matures.
If the outlined initiatives converge—regulatory clarity, sufficient liquidity, and supportive tax policy—Japan could leverage its yen to become a pivotal node in the global on‑chain financial network, reshaping how capital moves across borders in the digital age.
Source: https://cointelegraph.com/news/yen-stablecoins-japan-crypto-ambitions?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
