Japan plans to approve the issuance of yen stablecoin.

On August 18, the Japanese Economic News Agency reported that the Financial Services Agency of Japan is expected to approve the issuance of the country's first stablecoin pegged to yen assets as early as this autumn, aimed at being used in international remittances and other areas.

The fintech company JPYC, headquartered in Tokyo, Japan, will register as a currency transfer operator within this month. Data provided by the Financial Times on July 28 shows that the value of stablecoins in circulation globally has increased to approximately $250 billion, most of which are pegged to dollar assets.

Stablecoins are based on blockchain technology. Stablecoins that are pegged to US dollar assets require at least a 1:1 reserve asset backing, which can be USD, demand deposits, US Treasury bonds, etc. The legal revision that took effect in Japan in June 2023 defines stablecoins as "local currency-denominated assets," distinguishing them from other cryptocurrencies and allowing banks, trust companies, and money transfer businesses to issue such currencies.

The new Japanese yen stablecoin will be named JPYC, with 1 JPYC fixed to exchange for 1 yen (approximately 0.05 RMB), backed by high liquidity assets such as yen deposits and Japanese government bonds. Individuals, businesses, and institutional investors can apply to purchase JPYC stablecoin and make payments and transfers, after which the stablecoin will be transferred to their electronic wallets. Application scenarios include remittances to overseas students, corporate payments, and blockchain-based asset management services.

According to Nikkei News, the project plans to issue 1 trillion yen (48.7 billion RMB) of JPYC stablecoin within three years.

The representative of JPYC, Okabe (phonetic), recently posted on social media X that the yen stablecoin could have a significant impact on the Japanese bond market. He pointed out that issuers of stablecoins pegged to dollar assets have become important buyers of U.S. Treasury bonds, using them as collateral for circulating tokens. For example, the preferred underlying assets for "Tether" (USDT) and "USD Coin" (USDC) are U.S. Treasury bonds.

Okabe hinted that if JPYC is widely used, a similar trend might emerge in Japan, thereby boosting demand for Japanese government bonds. "In the future, JPYC is likely to start purchasing a large amount of Japanese government bonds."

The Bank for International Settlements warned on June 24 that decentralized stablecoins have "performed poorly" in becoming widely usable currencies. In its annual economic report released on that day, the Bank stated that such stablecoins have three major flaws: first, they lack central bank backing; second, they lack sufficient safeguards against illegal use; and third, they do not have the financial flexibility to generate loans.