Japan -- Stablecoin Regulations Regulatory Overview

Japan's regulatory framework for stablecoins centers on the Payment Services Act (PSA) amendments, which classify stablecoins as electronic payment instruments (EPIs) rather than securities, with strict requirements for issuers, reserves, and redemption guarantees.[1][2][5]

Classification and Scope

Digital-money type stablecoins are defined as fiat-pegged, par-redeemable tokens under the PSA framework.[5] The FSA distinguishes these from other price-stable tokens—such as algorithmic or crypto-collateralized stablecoins—which are classified as crypto-assets under existing crypto asset rules and cannot be marketed as stablecoins.[7] Tokens failing to meet redemption requirements are automatically reclassified as crypto-assets, subject to different regulatory treatment.[6]

Issuer Licensing

Only three types of licensed domestic financial institutions can issue digital-money type stablecoins:[2][4]

• Banks: Issue stablecoins as deposits covered by Japan's existing deposit insurance system
• Fund transfer service providers: Back tokens with money deposits, bank guarantees, or entrusted safe assets (including Japanese government bonds)
• Trust companies: Hold all trusted assets as bank deposits, with provisions allowing up to 50% in low-risk short-term instruments post-2025

Foreign crypto exchanges and intermediaries wishing to serve Japanese residents must register with the FSA, even if their primary market is elsewhere.[3]

Reserve and Redemption Requirements

All stablecoin issuers must maintain full reserves in cash or highly secure assets, with strict asset segregation from the issuer's own funds.[7] Every issuer is legally required to guarantee redemption at par value (face value) to token holders.[2][4] Reserve structures vary by issuer type:[4]

• Banks: Deposits subject to prudential regulations; holders are protected up to 10 million JPY by deposit insurance
• Fund transfer service providers: Money deposits, bank guarantees, or entrusted safe assets
• Trust companies: Bank deposits; post-2025, up to 50% in low-risk short-term instruments

Issuers are prohibited from lending or trading with reserve assets.[7]

Consumer Protection and Compliance

Intermediaries and issuers must comply with stringent Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) standards, customer identity verification requirements, and consumer protection measures.[1][7] Any entity conducting intermediary activities—including buying, selling, exchanging, custody, or transfer services—must register with the FSA and follow the same regulatory requirements as crypto asset intermediaries.[3]

Algorithmic Stablecoin Rules

Algorithmic stablecoins and other tokens that cannot guarantee par-value redemption are not permitted under the digital-money stablecoin framework and are instead classified as crypto-assets.[4][6] These fall under existing crypto asset regulations and cannot be marketed as stablecoins.

Legislation and Timeline

The core PSA amendments took effect in June 2023, with further refinements implemented by June 2026.[4] A subsequent amendment enacted in June 2025 added lighter intermediary categories for brokers, relaxed reserve rules for trust-type issuers, and increased flexibility for cross-border handling.[4] JPYC became the first licensed stablecoin issuer authorized in August 2025, followed by Circle–SBI's USDC distribution efforts.[5][8]

CBDC Interaction

The Bank of Japan (BOJ) leads Central Bank Digital Currency (CBDC) research and monitors monetary and financial stability, coordinating with the FSA and Ministry of Finance on systemic issues, but operates separately from the stablecoin regulatory framework.[5] The FSA is also reviewing whether certain crypto-assets should move from PSA oversight to the Financial Instruments and Exchange Act, though this would not directly affect the stablecoin framework.[4]

Note: Specific URLs from regulatory PDFs were provided in the search results but cannot be directly included in this response. The framework is administered by the Financial Services Agency (FSA), which publishes guidance and maintains lists of registered issuers and intermediaries on its official website.