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Japan Set to Approve First Yen-Backed Stablecoin This Fall, Marking Historic Shift in Digital Currency Policy

Japan's Financial Services Agency (FSA) will approve yen-backed stablecoins this fall, making it the first time the country allows a domestic digital currency tied to its national currency.

Tokyo-based company JPYC will lead this groundbreaking launch after registering as a money transfer business within the month, according to Japanese financial newspaper Nihon Keizai Shimbun.

This decision puts Japan ahead of most countries in creating clear rules for digital currencies. The move comes as the global stablecoin market has grown to over $286 billion, mostly dominated by US dollar-backed tokens like USDT and USDC.

How JPYC Will Work
JPYC will maintain a fixed rate of one token equals one Japanese yen. The company backs each token with real assets including bank deposits and Japanese government bonds. When people or businesses want to buy JPYC tokens, they submit applications and pay through bank transfers. The tokens then go directly to their digital wallets.

The company must follow strict rules to keep the system stable. JPYC needs to deposit 101% of the highest amount of tokens they issue within one week. They have just three business days to make these deposits under current regulations.

Unlike many other digital currencies, JPYC won’t create its own blockchain. Instead, it will use existing public blockchains, keeping the system open and connected to the broader crypto world.

Impact on Japan’s Bond Market
JPYC representative Ryosuke Okabe believes yen stablecoins could change Japan’s government bond market. He pointed out that major US stablecoin companies have become some of the biggest buyers of US Treasury bonds, using them to back their tokens.

“JPYC will likely start buying up Japanese government bonds in large quantities going forward,” Okabe wrote on social media. He called stablecoins “absorption machines” for government bonds, suggesting they create new demand that could help keep interest rates low.

Okabe warned that countries slow to develop stablecoins might face higher government bond interest rates. They miss out on this new type of institutional demand that stablecoin companies create.