Japan FSA Imposes Strict Bond Criteria for Yen-Backed Stablecoins

TLDR

• Japan’s Financial Services Agency has proposed strict rules for stablecoin reserve assets under the 2025 Payment Services Act.
• The new rules require foreign bonds to have top credit ratings and at least 100 trillion yen in total issuance.
• Only the largest global sovereign and corporate issuers will qualify under the proposed collateral standards.
• Financial institutions must clearly warn customers about the risks of digital assets despite carrying banking brands.
• JPYC plans to allocate most of its stablecoin reserves to Japanese government bonds under the new framework.

Japan has introduced strict new rules for stablecoin reserves, raising the bar for which foreign bonds qualify as backing. The Financial Services Agency (FSA) released its proposal as part of the 2025 Payment Services Act implementation. The new rules could reshape the landscape for stablecoin issuers and their investment strategies.

FSA Limits Eligible Foreign Bonds for Stablecoin Reserves

Japan’s FSA requires foreign bonds backing stablecoins to meet dual credit and issuance benchmarks. Issuers must hold a credit rating of “1–2” or higher from approved agencies and maintain over 100 trillion yen in total outstanding debt.

This new standard restricts the pool to only the largest global entities. As a result, only top-tier sovereign or corporate issuers will qualify under the proposed guidelines.

The draft outlines how stablecoin issuers may invest in “specified trust beneficiary interests” under the revised framework. These notices aim to implement changes passed through Act No. 66 of 2025.

Japan Sets Rules for Digital Asset Intermediaries

Japan’s new supervisory guidelines also address risk disclosure by traditional financial institutions entering digital asset services. Banks and insurance companies must clearly warn clients that crypto-related products still carry high risk.

The FSA requires firms not to imply added safety simply because of their established financial brand. This move aims to reduce customer misunderstandings and promote fair disclosure practices.

Businesses distributing foreign stablecoins in Japan must also meet new screening obligations. These include confirming that overseas issuers will not directly target Japanese retail customers.

Authorities will cooperate internationally to monitor issuer behavior. The goal is to prevent regulatory loopholes and improve cross-border compliance.

JPYC and Major Banks Push Yen-Backed Stablecoins

JPYC launched Japan’s first legal yen-backed stablecoin under the revised law on October 27. The company plans to allocate 80% of its reserve assets to Japanese government bonds (JGBs), with the remaining 20% in bank deposits.

Founder Noritaka Okabe stated, “With the BOJ tapering bond buying, stablecoin issuers could emerge as the biggest holders of JGBs.” Currently, the Bank of Japan holds around 50% of the 1,055-trillion-yen JGB market.

JPYC expects stablecoin issuers to become major players in the debt market. However, Okabe noted that while authorities may influence bond duration, controlling total holdings would be harder.

Japan’s three megabanks—Mitsubishi UFJ, Mizuho, and Sumitomo Mitsui are also advancing yen-backed stablecoin plans. They will offer infrastructure for corporate clients to transfer tokens in compliance with standard protocols.

The group intends to support domestic settlement systems using pegged digital currencies. Plans include expanding to dollar-pegged stablecoins. The consultation period for the FSA’s draft rules runs through February 27, 2026. Final regulations will follow after public feedback and review.

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