Japan FSA sets tough bond rules for yen stablecoin reserves

Japan’s Financial Services Agency has unveiled strict collateral requirements for stablecoin reserve assets, setting a high threshold that could limit which bonds qualify as backing for digital yen instruments, according to regulatory notices published by the agency.

The proposed rules mandate that foreign-issued bonds must carry top-tier credit ratings and come from issuers with at least 100 trillion yen in outstanding debt, a bar few global entities can meet.

Japan drafts new stablecoin standards

The draft standards emerged as part of regulatory notices implementing the 2025 Payment Services Act amendments, establishing how stablecoin issuers may invest “specified trust beneficiary interests” under Japan’s digital currency framework. The FSA has opened a public consultation on stablecoin reserves, seeking feedback on which bonds can back yen-pegged tokens. The consultation period runs through February 27, 2026.

The proposed FSA notice restricts eligible backing assets to foreign bonds that meet dual criteria. Qualifying bonds must achieve a credit risk rating of “1–2” or higher from designated agencies while originating from entities whose total bond issuance reaches the 100 trillion yen minimum.

Beyond collateral standards, new supervisory guidelines target banks and insurance subsidiaries offering cryptocurrency intermediation services. Financial institutions must explicitly warn customers not to underestimate digital asset risks simply because products carry a traditional banking brand, according to the guidelines.

The FSA also introduced screening requirements for businesses handling foreign stablecoins, demanding confirmation that overseas issuers will not directly solicit Japanese retail customers. Regulators plan to coordinate cross-border with foreign authorities to monitor these instruments and their originators.

The measures implement Act No. 66 of 2025, which revised Japan’s settlement and electronic payment framework in June. After public comments close, the rules will undergo final procedures before taking effect.

MofJPYC, the Tokyo-based issuer of Japan’s first yen-pegged stablecoin, has indicated that digital asset companies could become significant holders of government bonds as reserve requirements expand. The company launched its yen-backed stablecoin on October 27 under Japan’s revised Payment Services Act, marking the nation’s inaugural legal framework for stablecoins.

Founder and CEO Noritaka Okabe told Reuters that stablecoin issuers might assume roles traditionally occupied by the Bank of Japan, which has been reducing bond purchases following years of aggressive monetary easing. “With the BOJ tapering bond buying, stablecoin issuers could emerge as the biggest holders of JGBs in the next few years,” Okabe stated, adding that while authorities could influence bond duration, controlling total holdings would prove challenging.

The BOJ currently holds roughly 50% of the 1,055-trillion-yen Japanese government bond market, followed by insurance companies and domestic banks, according to market data. Foreign investors and public pensions represent smaller market shares.

Okabe stated that stablecoin issuers could fill emerging gaps, with JPYC planning to allocate 80% of proceeds to JGBs and 20% to bank deposits.

Japan’s three largest financial institutions, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, are collaborating on a joint initiative to launch yen-backed stablecoins for domestic users.