The PSA Framework: Only Three Types of Issuers Qualify
Japan’s Financial Services Agency (FSA) finalized its stablecoin architecture through amendments to the Payment Services Act (PSA), effective June 2023, with further refinements set to take effect by June 2026. The framework classifies fiat-pegged, par-redeemable stablecoins as Electronic Payment Instruments (EPIs) — a legally distinct category from crypto-assets — and draws a hard line around who can issue them.
Only three types of FSA-licensed domestic entities are authorized to issue stablecoins directly to Japanese residents: banks, fund transfer service providers, and trust companies. Each category operates under its own reserve structure.
- The PSA Framework: Only Three Types of Issuers Qualify
- JPYC: First Licensed Issuer Under the New Regime
- Dollar Stablecoins Face a Structural Barrier
- Japan’s Megabanks Are Now Moving In
- Intermediaries: A Separate Compliance Stack
- The Terra/Luna Shadow and Why Japan Designed It This Way
- What the Pipeline Looks Like
Banks issue stablecoins as deposits, covered by Japan’s existing deposit insurance framework. Fund transfer service providers must back their tokens with money deposits, bank guarantees, or entrusted safe assets including Japanese government bonds (JGBs). Trust companies hold all trusted assets as bank deposits, with a post-2025 provision — enacted through the Amendment Act 2025 — allowing up to 50% in low-risk short-term instruments, including JGBs or U.S. government bonds with remaining maturity of three months or less, and time deposits permitting early termination.
Algorithmic stablecoins and crypto-backed stablecoins are explicitly excluded from the EPI category. They remain classified as standard crypto-assets under the PSA, subject to an entirely different regulatory track. The FSA’s administrative guidelines prohibit crypto-asset exchange service providers from referring to these instruments as “stablecoins,” on the grounds that the label is misleading.
JPYC: First Licensed Issuer Under the New Regime
JPYC Co. became the first company to secure a fund transfer service provider license under the revised PSA framework in August 2025. In October 2025, it launched what the company and regulators describe as the world’s first fully regulated yen-pegged stablecoin.
The token runs on Avalanche, Ethereum, and Polygon, carries 1:1 yen reserve backing, and charges no transaction fees. Revenue is generated from JGB interest earned on the reserve pool rather than from user-facing fees. JPYC has set a target of 10 trillion yen in circulation within three years, with a longer-term target of 60 trillion yen within five years, focused on remittances, payments, and cross-border Web3 settlements.
JPYC’s predecessor product had operated since 2021 as a Prepaid Payment Instrument — a different legal category that predated the EPI framework. Hokkoku Bank’s regional Tochika token in Ishikawa Prefecture was the other visible early experiment before the current regime took shape. Neither was issued under the formal stablecoin rules that JPYC now operates under.
“Japan built a structure where every yen-pegged token in circulation carries a redemption guarantee, a licensed issuer, a segregated reserve, and FSA oversight. That tradeoff will look different depending on whether you are a Tokyo retail user, a megabank treasury desk, or a foreign exchange trying to list USDC.” — Bitcoincom News, April 3, 2026
Dollar Stablecoins Face a Structural Barrier
Dollar-denominated stablecoins control approximately 97% to 99% of the global stablecoin market by volume. In Japan, that share collapses. Foreign issuers cannot distribute to Japanese residents without meeting the same user protection, reserve, and AML standards required of domestic licensed entities — a compliance threshold that most have not cleared.
USDT remains largely restricted on Japanese platforms as of early 2026. Japanese exchanges have historically avoided listing dollar stablecoins rather than navigate the compliance structure. USDC has a limited, regulated pathway: SBI VC Trade commenced handling USDC in April 2025 under a partnership between Circle and SBI Holdings, but access remains capped and is not broadly available to retail users.
The preference for yen-denominated digital assets is not entirely a regulatory construct. Japan’s cash-heavy economy generates less natural demand for dollar liquidity tools, and yen usage in regional remittances already provides a functional alternative for cross-border settlement. The FSA framework reinforced existing market behavior rather than working against it.
Japan’s Megabanks Are Now Moving In
Japan’s three largest banks — MUFG, SMBC, and Mizuho — are developing trust-based yen stablecoins through the Progmat platform via joint proof-of-concept programs. SBI Holdings has announced plans to launch a yen stablecoin in Q2 2026, developed in partnership with Web3 infrastructure provider Startale, targeting tokenized asset markets and global settlement systems.
Sony Bank has partnered with JPYC Inc. to develop yen stablecoins specifically for everyday payments and retail use cases, with pilot programs targeting e-commerce, in-app purchases, and remittances scheduled to begin in Q2 2026. Nomura and Daiwa Securities have formed a consortium with several major banks to develop regulated trading and settlement infrastructure for the stablecoin ecosystem.
The total JPY stablecoin market cap sits at approximately $36.6 million as of early 2026 — modest against global USD volumes, but growing in the institutional and cross-border payment segments where Japan’s framework functions as designed.
Table 1 — Japan Stablecoin Issuer Types Under the PSA Framework
| Issuer Type | Reserve Structure | Coverage | Status (2026) |
|---|---|---|---|
| Banks | Deposits under deposit insurance | Deposit insurance system | Active (MUFG, SMBC, Mizuho piloting) |
| Fund transfer providers | Cash deposits, bank guarantees, JGBs | Segregated trust | Active (JPYC licensed Aug 2025) |
| Trust companies | Bank deposits; up to 50% in short-term instruments post-2025 | Trust structure | Progmat platform developing |
| Foreign issuers (e.g. USDT, USDC) | Must meet same standards as domestic entities | Not covered by Japanese system | USDT restricted; USDC limited via SBI VC Trade |
Intermediaries: A Separate Compliance Stack
Any entity buying, selling, custodying, or transferring EPI stablecoins in Japan must register as an Electronic Payment Instrument Exchange Service Provider (EPIESP). This intermediary layer carries its own compliance obligations, distinct from those of the issuer.
Registered EPIESPs must hold at least 95% of customer crypto-assets in cold wallets, segregate user funds in trust structures, comply with FATF Travel Rule requirements, and maintain contractual liability-sharing agreements with issuers covering losses from bankruptcy, hacks, or technical failures.
The Amendment Act 2025, enacted in May 2025 and scheduled for full effect by June 2026, introduces a lighter intermediary category for pure brokers, relaxes some reserve rules for trust-type issuers (the 50% short-term instrument provision), and creates more flexibility for cross-border stablecoin handling. FSA consultations from January 2026 addressed which bond types qualify as eligible reserves under the updated rules.
The Terra/Luna Shadow and Why Japan Designed It This Way
The FSA’s framework was deliberately hardened by the 2022 Terra/Luna collapse, which destroyed tens of billions in value globally. Japanese regulators concluded that the fundamental risk in stablecoins is a bank run — the same dynamic that destabilizes conventional financial institutions — and built redemption at par as the non-negotiable foundation of the system. Every licensed issuer is legally required to honor that guarantee on demand.
Japan’s regulatory history created the conditions for this outcome. The 2014 Mt. Gox collapse — then the world’s largest exchange — pushed the government into its first PSA crypto amendments by 2016, establishing exchange registration requirements, user asset segregation, and AML compliance for digital assets broadly. That institutional memory of exchange failure shaped how the FSA approached stablecoin design a decade later.
The framework that resulted is explicit about what it sacrifices. It moves slowly. It favors domestic issuers. It keeps the largest global stablecoins effectively sidelined. In exchange, it guarantees that every yen-pegged token in circulation is backed by a licensed entity, segregated reserves, and FSA oversight. The FSA is also reviewing whether certain crypto-assets should move from PSA oversight to the Financial Instruments and Exchange Act (FIEA) — a reclassification that would not affect the stablecoin framework directly but could alter investor protections across the broader digital asset market.
What the Pipeline Looks Like
More bank launches are expected through 2026. JPYC is expanding interoperability through a partnership with Circle and a TIS integration for enterprise payments. Sony Bank’s pilot with JPYC targets Q2 2026. SBI’s own yen stablecoin, developed through the Startale partnership, is also targeting Q2 2026.
The FSA has launched a public consultation on a comprehensive overhaul of crypto and electronic payment rules covering licensing requirements, stablecoin issuance standards, taxation, custody rules, and consumer protection, with a target to finalize the updated framework by end of 2026.
The total market cap of JPY stablecoins remains small relative to global dollar-denominated volumes. But the infrastructure — licensing framework, reserve requirements, intermediary standards — is now in place and operational. The next 12 months will determine whether Japan’s deliberate, restrictive design produces a domestic stablecoin market at scale, or remains a well-structured system with limited uptake.
