Japan’s Bold Steps Towards Regulating Stablecoin Reserves

Japan is taking significant strides in the regulation of cryptocurrencies and digital payments, marking a new chapter in its financial regulatory framework. The nation’s financial regulatory body has introduced draft rules for public consultation, intended to redefine the types of bonds permissible in stablecoin reserves. This move is part of the ongoing efforts to implement legal changes, which will officially be recognized in 2025. The consultation process is central to Japan’s ambition of crafting a well-regulated stablecoin ecosystem, featuring clearly delineated and obligatory regulations.

What Constitutes Acceptable Bonds for Reserves?

In a statement released on Monday, the Financial Services Agency outlined several draft notifications concerning the revisions to the Payment Services Act set for 2025. These notifications focus on the management of reserve assets for stablecoins supported by trust structures. Specifically, the framework categorizes which assets can be managed under the investment structure known as “specific trust beneficiary interests” utilized by stablecoin issuers.

The proposed regulations set stringent standards for bonds eligible as reserve assets. Only bonds from foreign issuers with top-tier credit ratings will be considered acceptable. To qualify, these bonds must possess a rating of “1–2” or higher, and the foreign issuer must have a bond portfolio totaling at least 100 trillion yen. This criterion is key to ensuring the reserve assets’ liquidity and dependability.

The consultation for these drafts will remain open until February 27, 2026. Following the legislative updates to the payment and electronic instruments laws in June 2025, a more transparent regulatory framework for stablecoin issuers is expected.

How Are New Intermediary Rules Shaping the Sector?

The draft guidelines extend beyond reserve specifics, encompassing fresh supervisory standards for banks, insurance firms, and their subsidiaries. A noteworthy addition mandates subsidiaries dealing with cryptocurrency services to explicitly warn customers of associated risks, deterring any misconception that belonging to a traditional financial conglomerate implies reduced risk.

Further requirements are set for businesses interacting with foreign stablecoin entities. Proposals must confirm that the foreign issuer will refrain from targeting the Japanese general public with issuance, redemption, or marketing activities. The Financial Services Agency has also expressed intentions to exchange information about such assets and issuers with regulators from other nations.

These initiatives are in harmony with Japan’s strategy for moderated sector growth. Recently, JPYC introduced Japan’s first lawful yen-based stablecoin, and major banks MUFG, SMBC, and Mizuho launched token pilots for payments and financial services, activities backed by regulatory approval.

• Foreign issuer bonds eligible for reserve must have a credit rating of “1-2” or above.
• Foreign issuer’s total bond stock should be no less than 100 trillion yen.
• Public consultation is ongoing until February 2026 to solidify the regulatory framework.

The recent regulatory moves demonstrate Japan’s commitment to leading in safe and innovative financial solutions, reflecting its proactive stance in the evolving financial landscape. The collaboration between financial authorities and traditional institutions underscores their resolve to balance innovation with security.