A series of stablecoin projects are beginning to shake up Japan’s digital money ecosystem. This month, the door to yen-pegged stablecoins was quietly opened. However, these are no substitute for cash at your local supermarket. Instead, it is being built in a quiet corner of the financial world.
Makoto Shibata, head of Tokyo-based fintech innovation hub Finolab, said Japan’s payments market is full of cashless options, which could limit the appeal of stablecoins in everyday transactions.
Historically, Japan has progressed toward cashless payments.
Mr. Shibata said, “If you go to a convenience store, there are probably 40 to 50 different payment methods.I don’t think stablecoins will compete with real-world payments, but I think it will create new use cases for online purchases and online payments.”
Japan’s cashless payment ratio has risen to 43% in 2024, but cash remains the preferred payment method for small businesses and rural areas in Japan. Shibata said that the real potential of stablecoins lies not in everyday transactions, but in digital commerce and online payments.
“There is a strong desire from private companies to make international remittances more efficient.”
Stablecoin for B2B payments
Fintech startup JPYC launched Japan’s first yen-based stablecoin This was the first license issued under the newly amended Payment Services Act. JPYC, a non-bank entity founded in 2019, received approval to issue stablecoins on August 18 after a difficult multi-year licensing process.
Major Japanese banks are also considering stablecoins for B2B payments to help businesses move funds faster. Traditional banks are under pressure to digitize payments or risk being left behind on the world stage. On October 17th, the three mega banks, MUFG, Sumitomo Mitsui, and Mizuho, Announcement of joint plan Issue a yen-pegged stablecoin.
The two banks plan to build an infrastructure that will enable business partners to smoothly transfer funds between each other under unified standards. The companies plan to begin pilot testing the stablecoin system within hundreds of Mitsubishi subsidiaries using a system developed by Tokyo-based fintech startup Progmat. Although the move is modest in scale, it signals a turning point.
“If banks are reluctant to introduce new payment methods, they will lose business and deposit base to other financial institutions. I think it is very symbolic that not just a single bank, but three megabanks are coming together to support this movement.”
~ Mr. Makoto Shibata, representative of Finolab.
Japan’s steady progress towards tokenization
Shibata said there are signs that the Japanese market for secure tokens and digital assets tied to real-world assets will expand. The banking sector is supporting DeFi innovation behind the scenes.
The Progmat platform has attracted investment from major sponsors including MUFG and Mizuho. Meanwhile, Nomura Holdings and Nomura Research Institute have jointly launched a blockchain subsidiary called Boostry to develop Japan’s security tokenization market. SBI Group is also a major sponsor of the Osaka Digital Exchange (ODX), a digital asset market, and hopes to build a digital asset hub in the Osaka area.
The shifting interest in DeFi was on full display at this year’s Tokyo Web3 Expo, with the audience changing from mostly crypto nerds to suit-wearing executives. Unlike the US and Europe, where fintech startups compete with financial institutions, web-native startups typically work with banks.
According to KPMG, there are approximately 400 fintech companies in Japan, of which 30-40% are focused on payment and remittance services. This is a relatively low number compared to Singapore’s 900 and Hong Kong’s 1,100.
In the 38th International Financial Center Index, Tokyo was ranked 15th out of 135 cities in overall financial markets. However, in the fintech space, Tokyo lags behind Hong Kong, Singapore, Seoul and Beijing in its ability to provide a competitive environment for fintech providers.
Collaboration over chaos
Bitcoin emerged as the antithesis to traditional finance and thrived in deregulated markets like the US, but Japanese business culture favors carefully designed fundamentals and strong foundations before innovation, explains Soichiro Tokuriki, CEO of Next Finance Tech, a Japan-based blockchain infrastructure company founded in 2021.
Tokuriki said Japan prefers to “build reinforced concrete bridges with reliable institutions before crossing them.” He said that wariness explains why there are so few domestic crypto tokens, and why most Web3 infrastructure used by Japanese exchanges still comes from overseas.
Japan’s technology landscape reflects a cautious approach to innovation. Tokuriki highlights the pattern that as Japanese society matures overseas, it tends to adopt foreign technology, such as the iPhone and Microsoft software.
Currently, banking laws prohibit banks and bank subsidiaries from providing virtual currency trading services. This month, the Financial Services Agency Review of restrictions.
Tokuriki said Japan’s biggest opportunity lies in allowing investors to gain exposure to crypto assets through exchange-traded funds and mutual funds. He noted that BlackRock, the world’s largest asset manager, has already started incorporating Bitcoin as part of its model portfolio.
Tokuriki, a former Goldman Sachs asset manager, said there is strong demand for alternative assets in Japan. He said retail and institutional investors are seeking new forms of diversification within existing financial rules.
Consensus building is an important consideration in the Japanese business world. As Japan’s financial market is one of the largest in the world, Tokuriki emphasizes the importance of a “collaborative mindset” to grow and innovate within the ecosystem.
“Japan’s risk-averse culture may not suit ‘hard’ entrepreneurs, but I believe the key is to work together and find ways to help traditional financial players build businesses using new technologies, rather than seeking complete disruption.”
Finolab’s Makoto Shibata emphasizes that Japan’s progress in digital assets will be evolutionary rather than explosive. He said stablecoin adoption is not a competition. Each step in Japan’s slow and steady model is to demonstrate how technology can improve finances and efficiency, even for a few new use cases at a time.
