Japan stablecoin issuers could fill central bank’s bond-buying gap: Report
Japan's startup JPYC, the first domestic issuer of a yen-pegged stablecoin, plans to influence the country’s sovereign debt market using stablecoin reserves. JPYC’s token, backed by bank deposits and Japanese government bonds (JGBs), was launched under Japan's revised Payment Services Act. The company intends to invest 80% of issuance proceeds in JGBs, potentially filling the gap left as the Bank of Japan slows bond purchases. JPYC aims for $66 billion in circulation within three years, linking blockchain adoption and fiscal financing. Separately, Japan's Financial Services Agency has endorsed a yen-pegged stablecoin project involving major financial institutions, signaling increasing stablecoin adoption in traditional finance.
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Japan's First Stablecoin Issuer and Debt Market Impact
Japan’s first domestic stablecoin issuer, JPYC, has indicated that digital asset companies may soon become significant players in the country’s sovereign debt market. This development has the potential to reshape Japan’s monetary policy. JPYC, the company behind Japan’s first yen-pegged stablecoin, highlighted the possibility of stablecoin issuers evolving into major buyers of Japanese government bonds (JGBs) as their reserves grow.
Stablecoin Reserves Filling the BOJ's Role
Noritaka Okabe, JPYC founder and CEO, stated in comments reported by Reuters that stablecoin reserves could fill the gap left by the Bank of Japan (BOJ) as it reduces bond purchases. JPYC’s yen-backed token, also dubbed JPYC, was launched on October 27 under Japan’s revised Payment Services Act, the country’s first legal framework for stablecoins. The company has issued approximately $930,000 worth of tokens so far and plans to reach circulation of $66 billion within the next three years.
JPYC Token Backing and Blockchain Integration
The JPYC token is backed by bank deposits and JGBs and is fully convertible to yen. It has been designed to move seamlessly across blockchain systems, providing flexibility and efficiency in transactions. This integration presents a new approach for leveraging blockchain in the traditional monetary system.
Stablecoin Issuers as Major JGB Buyers
Okabe revealed JPYC’s plan to invest 80% of its proceeds in JGBs, while the remaining 20% is retained in bank savings. Initially, the focus will be on short-term securities, but longer-term JGBs may be considered in the future based on demand and yield attractiveness. This allocation strategy grants stablecoin issuers a significant role in Japan’s debt market, especially as the BOJ slows its bond purchasing, leaving new buyers to absorb JGB issuance.
Global Impact and Blockchain Adoption
Okabe emphasized that the volumes of JGBs purchased by stablecoin issuers will be influenced by the supply and demand for stablecoins. He noted that this trend “will happen around the world” and that Japan is no exception. This linkage between blockchain adoption and fiscal financing highlights a global shift in financial systems.
Growing Stablecoin Adoption in Japan
Stablecoins are gaining traction in Japan’s traditional finance sector. On Friday, the Financial Services Agency (FSA) endorsed a yen-pegged stablecoin project led by Japan’s largest financial institutions, including Mizuho Bank, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, and others. As part of the FSA’s “Payment Innovation Project”, these institutions will begin issuing payment stablecoins this month, reflecting Japan’s commitment to integrating stablecoins into mainstream finance.