AVAX Adoption Boost? Japan Approves Yen-Backed Stablecoin for Launch on Avalanche

• JPYC becomes first in Japan to issue yen-pegged stablecoin backed by bonds and deposits.
• Avalanche gains long-term strength from stablecoin launch despite short-term bearish technical signals.

JPYC Inc., a fintech company based in Tokyo, has obtained official registration under Japan’s revised Payment Services Act. This approval makes the company the first licensed platform in the country allowed to issue a stablecoin pegged 1:1 to the Japanese yen.

The stablecoin will be rolled out on Avalanche, Ethereum, and Polygon, offering issuance and redemption services that let users exchange yen for on-chain assets. Verification for issuance will rely on Japan’s My Number card IC chip, ensuring strict KYC checks with reduced costs.

Backing for the stablecoin will come from government bonds and trust deposits, with reserves maintained above 101%. At launch, 80% of reserves will be allocated to bonds and 20% to deposits, though JPYC signaled that longer-term bonds could feature later.

Yen-Backed Stablecoins Projected to Hit ¥83 Trillion

JPYC estimates the market for yen-secured stablecoins may grow to between ¥40 trillion and ¥83 trillion ($270 billion and $560 billion) in a period of around five years, with carry trade activity poised to contribute significantly. The issue target of the company lies anywhere between tens of billions in the beginning to ¥10-100 trillion in the longer term.

From the stream of revenues, JPYC projects annual gross profits of roughly ¥5 billion ($34 million) per issued ¥1 trillion ($6.8 billion). This significant portion of the earnings would be from interest on reserve-keeping government bonds.

The stablecoin would be available for cross-border payments, decentralized finance, and e-commerce, both to businesses and individuals. The regulatory framework also guarantees that with regard to suspected illegal activity, courts or law enforcement may ask for blocks of transactions.

Stablecoin Approval Boosts Avalanche (AVAX) Outlook

Avalanche is set to gain significantly from this development, as the stablecoin launch gives its network’s use case a boost. According to on-chain statistics from Nansen, daily transactions increased by over double in the last month, rising from a low of 500,000 around early July, to above 1.3 million by mid-August.

The bulk of the increase spanned two weeks, reflecting increased usage growth despite pressure on the overall market. Such development reflects building optimism in Avalanche’s long-term prospects even in the face of recent weakness in price.

AVAX is currently trading at $23.34, a 1.6% decline within the past day. The token dropped down to its 50-day Exponential Moving Average of $22.74, with analysts cautioning a close below this support giving way to $20.99.

Technical indicators suggest caution in the short term. The Relative Strength Index is at 48, below the 50-level of neutrality, and a bearish crossover on the MACD, both indicating pressure towards additional downside.

Despite this, analysts note that Avalanche’s surging fundamentals set the stage well for future development. The confluence of a yen-backed Stablecoin approval by Japan and surging user activity bodes a favorable future, even despite fading momentum.