Japan unleashes stablecoin surge with new crypto reforms

Japan's Financial Services Agency (FSA) has taken decisive steps to create a robust regulatory framework for stablecoins by establishing a dedicated Crypto Assets and Stablecoins Division set to operate from August 2026. This division will oversee licensing, supervision, and the implementation of equivalence frameworks that allow foreign-issued stablecoins like USDC to function within Japan's regulated ecosystem, reflecting a strategic commitment to integrating global digital assets under clear regulatory oversight.

The amended Payment Services Act of 2023 has formally classified stablecoins as Electronic Payment Instruments, restricting issuance to licensed entities such as banks, trust companies, and specific fund transfer service providers. This legal clarity has enabled Japan to remove the previous ¥1,000,000 transaction cap for second-category stablecoin operators, thereby unlocking institutional-scale payments and allowing corporate treasurers to settle large invoices seamlessly, a move that levels the playing field between emerging yen-pegged stablecoins like JPYC and trust-backed instruments such as SBI Shinsei Trust Bank’s JPYSC.

Complementing regulatory reforms, Japan has aligned its tax policy to foster innovation by reducing capital gains tax on crypto assets from approximately 50% to 20%, signaling a broader governmental intent to stimulate market growth. Additionally, Japan is actively enabling the on-chain yen carry trade, targeting multi-billion yen stablecoin issuance to support global asset management, which underscores the country’s ambition to become a hub for large-scale stablecoin deployment and cross-border digital finance.

Domestic operators such as SBI VC Trade and Coincheck have swiftly moved to capitalize on Japan's new regulatory framework by obtaining stablecoin operator registrations, positioning themselves at the forefront of the country's stablecoin ecosystem. SBI VC Trade is actively integrating USDC with ambitions to support innovative on-chain yen carry trades, while Coincheck, as the second registered operator, plans to expand USDC usage and gradually introduce a broader suite of on-chain financial services beyond remittances and payments.

This regulatory clarity, underscored by the Financial Services Agency’s establishment of a dedicated division for digital assets and stablecoins, has emboldened Japanese institutions to set ambitious deployment targets. By the end of the year, operators aim to handle stablecoin volumes in the hundreds of millions, with longer-term goals to issue billions, signaling a robust institutional appetite for on-chain asset management and stablecoin-based financial innovation.

Beyond domestic service expansion, the regulatory approval of foreign-issued trust-type stablecoins like USDC is catalyzing broader institutional ambitions, exemplified by Circle and Nomura’s plans to launch USDC-based corporate FX settlement platforms. This development highlights how Japan is emerging as a leader in integrating global stablecoins into its financial ecosystem, driving new market innovations that extend well beyond retail payments.

Project Musubi, a collaboration between SBI Group and Korean blockchain firm Nodeinfra, is pioneering cross-border stablecoin infrastructure by initially deploying test tokens pegged to the yen and won to simulate payments while regulatory frameworks mature. Leveraging the Canton Network, the project enables atomic payment-versus-payment settlement and distributed peer netting, which significantly mitigates settlement risk by ensuring simultaneous transaction completion. This phased approach, with SBI Digital Practice managing Japanese financial institution integration and Nodeinfra developing settlement protocols and onboarding Korean partners, exemplifies a strategic and cautious innovation model aligned with evolving regulatory environments in Japan and South Korea.

Japan is aggressively advancing a blockchain-based financial infrastructure designed to enable 24/7 real-time settlement of stocks and government bonds, aiming to eliminate the current multi-day lag and modernize its $7 trillion bond market. This initiative involves a joint public-private effort among the Financial Services Agency, Ministry of Finance, Bank of Japan, and major banks, which are already piloting tokenized stocks and JGBs and exploring blockchain-based collateral trials. Central to this effort is the tokenization of commercial banks’ deposits at the Bank of Japan into a wholesale CBDC, facilitating instantaneous interbank settlement and paving the way for innovative financial products such as real-time securities lending and collateral management, thereby reducing systemic risk and enhancing liquidity.

Japan’s largest blockchain settlement pilot, involving 40 banks, is testing on-chain real-time gross settlement (RTGS) to replace the traditional Zengin System’s end-of-day batch clearing, aiming for 24/7 instant interbank settlement. By exploring two blockchain architectures—the TD Lead Bank Model and the TD-SC Integration Model—the pilot ensures atomic settlement of both user token exchanges and interbank obligations, effectively eliminating settlement risk. The outcomes of this pilot will critically influence Japan’s decision on whether to incorporate blockchain architecture into its 2030 national payment system successor, marking a significant leap in leveraging stablecoins and blockchain for core financial infrastructure.

Circle and Nomura’s planned launch of a USDC-based corporate FX settlement platform by 2027 targets Japan’s $440 billion daily corporate foreign exchange market, leveraging Japan’s Financial Services Agency’s groundbreaking approval of USDC as a regulated payment instrument. Nomura will handle client onboarding, regulatory compliance, and integration with existing banking systems, while Circle, through its local branch Circle Japan and partnership with SBI Holdings, will provide USDC distribution. This initiative, alongside other innovations like SBI’s yen-pegged stablecoin JPYSC and Ripple USD’s launch in Japan, underscores the country’s accelerating integration of programmable monetary infrastructures and stablecoins into its financial ecosystem.