JPYC Inc. launched Japan's first regulated yen-pegged stablecoin on October 27, introducing compliance-focused digital currency infrastructure to the world's third-largest foreign exchange market. The company aims to challenge the dollar's near-total dominance in the $297 billion stablecoin sector, where 99% of all tokens are denominated in U.S. currency.
Key Aspects of the Launch
- •JPYC targets $67 billion in issuance within three years under Japan's strict regulatory framework that requires 100% reserve backing in yen deposits and government bonds.
- •The company generates revenue from interest on reserves rather than transaction fees, but faces exposure to rising Japanese government bond yields that have climbed 1.4 percentage points to 1.6% over two years.
- •Japan's debt-to-GDP ratio exceeds 250%, creating fiscal pressures that could affect stablecoin issuers relying on sovereign bond yields as their primary revenue source.
Regulatory Framework Shapes Market Entry
Japan established its stablecoin regulatory structure in June 2023, months after the TerraUSD collapse wiped out billions in value. The Payment Services Act restricts issuance to banks, funds transfer operators, and trust companies. All must maintain reserves equal to or greater than the stablecoins they issue, held in yen deposits and Japanese government bonds.
JPYC operates as a Type II funds transfer operator, the first company licensed under the new regime.
The designation comes with restrictions, including a 1 million yen cap per transaction for regulated platform trades. Japan's forex market represents approximately 17% of global trading volume, though the yen accounts for a smaller share of international settlement transactions.
The company set a three-year goal of 10 trillion yen in circulation, which would equal roughly $67 billion at current exchange rates. That target approaches USDC's $40 billion market capitalization. Whether a regulated, yen-backed token can attract users accustomed to dollar-denominated alternatives remains an open question.
Business Model Faces Interest Rate Pressures
JPYC eliminates fees for issuance, redemption, and transfers. The company instead collects interest from reserves held in deposits and government bonds. With Japanese government bonds yielding approximately 1%, each trillion yen in circulation would produce about 10 billion yen in gross profit.
Analysts have identified vulnerabilities in this approach.
Market commentator @ghoulpresident noted on X that 10-year Japanese government bond yields reached 1.6%, climbing 1.4 percentage points over the past two years. "Even a 1% rise in yields adds more than ¥100 billion in annual interest costs per ¥1 trillion of newly issued debt," he wrote, pointing to fiscal strain from a debt-to-GDP ratio above 250%.
Rising yields increase government borrowing costs but also boost returns for bondholders like JPYC.
The balance matters. Higher yields improve the company's revenue from existing reserves but signal broader economic pressures that could affect Japan's fiscal stability and, by extension, confidence in yen-backed instruments.
JPYC has secured partnerships with payment processors and enterprise software providers to build merchant acceptance. The technical infrastructure supports both consumer transactions and business-to-business applications.
Asia's Digital Currency Competition Intensifies
Japan's domestic market serves as a testing ground, but implications extend across Asia and global payment networks. Stablecoins purchased approximately $40 billion in U.S. short-term Treasury securities in 2024, ranking as the third-largest buyer after JPMorgan's government money market funds and China. A Japanese equivalent could generate parallel demand for government bonds, offering fiscal benefits beyond the digital currency sector.
Progmat, backed by Mitsubishi UFJ Trust and Banking Corporation, is preparing its own trust-based stablecoin.
SBI VC Trade began facilitating USDC circulation in Japan in March 2025. These moves establish competing models—some emphasizing domestic regulatory compliance, others prioritizing integration with established dollar-denominated tokens.
Stablecoins settled over $6 trillion in transactions last year, representing 3% of global cross-border payments. Traditional remittance services charge 6% to 9% in fees and require days to settle. Entrepreneur Ivan Soto-Wright noted on X in May 2025 that "stablecoins move instantly, with minimal fees."
Transaction volumes for the global stablecoin market exceeded Visa's payment volume in the first quarter of 2025. The shift from speculative trading to functional payment infrastructure is measurable.
Whether regulated frameworks can compete with less-restricted alternatives for users and capital will determine the sector's evolution.
Closing Thoughts
JPYC's launch tests whether consumer protection requirements and reserve mandates can produce competitive digital currency products. Japan built its framework before market expansion, unlike jurisdictions that imposed rules after problems emerged. The company's success or failure will influence regulatory approaches across Asia and potentially beyond as governments weigh the balance between innovation and stability.