Japan’s FSA plans strict bond rules for yen stablecoins, reshaping reserves, demand for JGBs and megabank-led yen digital settlement projects.
Summary
- The FSA’s draft rules require highest-rated foreign bonds from 100T-yen issuers as collateral for stablecoins, with the consultation remaining open until February 27, 2026.
- New guidelines tighten supervision of banks, intermediaries and foreign stablecoin issuers, while JPYC-style yen tokens can hold more JGBs.
- Megabanks MUFG, SMBC and Mizuho are boosting yen stablecoin settlement networks as BOJ tapers bond purchases, potentially turning issuers into major JGB holders.
Japan’s Financial Services Agency has unveiled strict collateral requirements for stablecoin reserves, setting a high threshold that could limit which bonds qualify as backing for digital yen instruments, according to regulatory notices published by the agency.
The proposed rules require bonds issued abroad to have high credit ratings and come from issuers with outstanding debt of at least 100 trillion yen, a limit that few global entities can meet.
Japan sets new stablecoin standards
The draft standards emerged as part of regulatory notices implementing changes to the Payment Services Act of 2025, which set out how stablecoin issuers can invest “specified interests of trust beneficiaries” under Japan’s digital currency framework. The FSA has opened a public consultation on stablecoin reserves, seeking feedback on which bonds could support yen-pegged tokens. The consultation period runs until February 27, 2026.
The proposed FSA notice limits eligible backup assets to foreign bonds that meet two criteria. Eligible bonds must achieve a credit risk rating of “1-2” or higher from designated agencies, while coming from entities whose total bond issuance reaches the minimum of 100 trillion yen.
In addition to collateral standards, new supervisory guidelines also target banks and insurance companies that offer cryptocurrency intermediation services. Financial institutions must explicitly warn customers not to underestimate the risks of digital assets simply because products carry a traditional banking brand, according to the guidelines.
The FSA has also introduced screening requirements for companies handling foreign stablecoins, requiring confirmation that foreign issuers will not directly solicit Japanese retail customers. Regulators plan to work cross-border with foreign authorities to monitor these tools and their makers.
The measures implement Law No. 66 of 2025, which revised Japan’s settlement and electronic payments framework in June. After public comments close, the rules will undergo final procedures before going into effect.
MofJPYC, the Tokyo-based issuer of Japan’s first yen-pegged stablecoin, has indicated that digital asset companies could become major holders of government bonds as reserve requirements increase. The company launched its yen-backed stablecoin on October 27 under Japan’s revised Payment Services Act, marking the country’s inaugural legal framework for stablecoins.
Founder and CEO Noritaka Okabe told Reuters that stablecoin issuers could take over a role traditionally held by the Bank of Japan, which has scaled back bond purchases after years of aggressive monetary easing. “As the BOJ phases out bond purchases, stablecoin issuers could become the largest holders of JGBs in the coming years,” Okabe said. He added that while authorities could influence bond maturities, controlling total holdings would prove challenging.
According to market data, the BOJ currently controls about 50% of the 1.055 trillion yen Japanese government bond market, followed by insurance companies and domestic banks. Foreign investors and government pensions represent smaller market shares.
Okabe stated that stablecoin issuers could fill new gaps, with JPYC planning to allocate 80% of proceeds to JGBs and 20% to bank deposits.
Japan’s three largest financial institutions, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, are working together on a joint initiative to launch yen-backed stablecoins for domestic users.
The banking trio plans to promote settlements using pegged cryptocurrencies, challenging the market dominance of dollar-denominated stablecoins. According to Nikkei, the banks will do that establishing an infrastructure that will allow corporate customers to transfer stablecoins between entities in accordance with standardized protocols, initially focusing on yen-pegged tokens, with potential dollar-pegged versions planned for future implementation.
Nomura Holdings and SBI Holdings are developing the first crypto ETF products, pending approval for listing on the Tokyo Stock Exchange.
The developments are in line with Japan’s digital financial transformation, with the use of cash payments increasing from 13.2% in 2010 to 42.8% in 2024, according to government data.
Reports indicate that Japan’s financial watchdog is considering allowing banks to buy and hold digital assets like Bitcoin for investment purposes before 2028.
#Japans #FSA #sets #strict #bond #rules #yen #stablecoin #reserves