On August 18, stablecoin issuer JPYC received Japan’s first funds transfer service provider license. This signals the Japanese government’s intent to reassert financial leadership within the Asia-Pacific, especially in light of increased competition from China’s digital yuan and other growing integrated digital payment systems.
This news comes amidst a flurry of other digital asset-related hype within Japan, with a proposed gold-and-crypto ETF by regional powerhouse SBI Holdings currently in the works, Shinsei Bank’s Aplus credit card enabling users to turn credit card points into crypto, and Japanese bitcoin treasury firm Metaplanet’s continued purchases of BTC to make it one of the largest BTC holders outside the United States.
Despite this recent increase in Web3-specific activities, Japan continues to face systemic difficulties in pushing innovation and widespread adoption. The country’s risk-averse culture, as well as early key failures such as the Mt.Gox collapse, mean that the industry requires significant public and private sector buy-in in order to drive true organizational change.
JPYC could be the answer to these problems, enabling a bridge between traditional financial institutions and the digital assets ecosystem. However, Japan must embrace the JPYC with significant conviction to achieve its full effects. Its inability to do so would result in JPYC potentially being just one of the many cautious experiments that have marked Japan’s economic history.
Despite being one of the most technologically advanced societies in the world, Japan has historically taken a more conservative approach to adopting financial innovations. In the realm of digital assets, the government has chosen to prioritize consumer protections in the wake of scandals such as the 2024 hacking of Japanese crypto exchange DMM, which led to losses of more than 44 billion yen ($300 million) and the 2018 Coincheck theft of nearly 79 billion yen ($534 million). These events hardened public opposition to Web3 and reinforced strict government frameworks aimed at ensuring consumer protection.
To this end, cash usage remains strong in Japan, especially among the elderly, with Japan’s National Police Agency considering a daily limit of 300,000 yen (around $2,000) on how much cash elderly people can transact via automated teller machines in an attempt to combat scams preying on the elderly. Significant cash usage was also cited by the Bank of Japan (BoJ)’s Kamiyama Kazunari as being one of the driving reasons behind the BoJ not having immediate plans to launch a central bank digital currency (CBDC), two years after the BoJ conducted CBDC pilots in 2023. Therefore, instead of government-led innovation, Japan has chosen to leverage private issuers like JPYC to lead its financial innovation.
As a result, digital asset-focused startups have struggled to achieve scale. Large financial institutions remain dominant in Japan’s financial systems, preventing smaller fintechs from being able to establish market traction. Heavy licensing requirements, among other challenges, have been a significant pain point for entrepreneurs and enterprises seeking to enter Japan’s market.
JPYC has the potential to significantly enhance Japan’s push for digital payments implementation, providing Japan with an opportunity to regain its leadership in Asia’s financial ecosystems.
The fact that JPYC operates on public blockchain infrastructure better enables it to accelerate decentralized finance (defi) adoption tailored for Japan’s population. With the number of active crypto accounts in Japan continuing to rise year-over-year, JPYC could help bring defi tools such as customized lending and payments platforms to this growing number of consumers. Furthermore, defi tools could also help capture Japanese who are skeptical of crypto’s volatility, offering better efficiency and transparency within the financial sector.
Regionally, JPYC could help Japan position itself as a counterbalance to China’s e-CNY, with cross-border regional pilots between the digital yuan and other currencies underway in countries, including Singapore, Saudi Arabia, Thailand, and the United Arab Emirates.
Additionally, a yen-backed stablecoin could help bolster Japan’s financial sovereignty, greatly affecting regional power balances in its favor with respect to the Indo-Pacific. Currently, USD-denominated stablecoins dominate the stablecoin market, and powerhouses like USDT and USDC are the most popular in the world. For Japan, a domestic alternative could reduce reliance on foreign currencies in digital transactions, strengthening the weakened yen in international finance.
Regulatory approval for JPYC will almost certainly serve as a catalyst for increased investment in Japan’s digital finance sector.
One of the most important legislative actions Japan can take immediately is to pursue tax reform. Japan has begun to recognize this fact, as evidenced by the June 2025 announcement of the Financial Services Agency’s proposals to recognize cryptocurrencies as “financial products” in the same manner as securities and other traditional financial products are currently viewed. This could result in the uniform application of a 20 percent tax on crypto gains, a huge win for digital asset adopters that are currently taxed up to 55 percent today.
However, implementation of this reform is another factor that must be considered. As Japan’s stalled approach to CBDCs has shown, early enthusiasm and support may not translate into actual change.
Japan must also shore up its expansion of cross-border digital trade, particularly in cryptocurrencies, whether this be through partnerships, strategic collaborations, or supply chain activities. With most trade settlements in Asia occurring in U.S. dollars, Japan has a vested interest in giving Japanese companies a sovereign and competitive alternative to foreign currencies. To this end, Japan’s megabanks would play a huge role in JPYC adoption, and their choice to enable JPYC usage in mainstream banking, credit networks, and enterprise payments would play a huge role in ensuring the JPYC’s success.
Japan’s approval of JPYC’s license is a clear test for Japan to see if it is ready to reclaim global financial leadership. Japan’s long history of caution in respect to digital finance adoption has left it behind in building digital financial infrastructure. JPYC’s approval represents Japan’s best chance to leave behind its cash-heavy past, reviving Japan’s global standing in finance.