The Japanese Yen stablecoin JPYC is born! Japan's first Compliance 3-year surge of 65.4 billion dollars.

Japanese fintech company JPYC Inc. has launched Japan's first legally recognized yen stablecoin, JPYC, which began trading on Monday local time. The JPYC stablecoin aims to maintain an Exchange Rate of 1:1 with the yen and operates on blockchains such as Ethereum. The company holds 100% yen deposits and government bonds as reserves for all JPYC issuance, in accordance with Japan's Payment Services Act.

Japan's first compliant yen stablecoin 100% backed by Japanese government bonds

(Source: JPYC Inc.)

JPYC Inc. announced on October 27 that it has launched the country's first legally recognized yen stablecoin. The company stated that the JPYC stablecoin is designed to maintain a 1:1 peg with the yen and is fully backed by yen deposits and Japanese government bonds. JPYC Inc. stated in a press release that the company will begin the issuance of JPYC tokens on Monday, along with the launch of its dedicated issuance and redemption platform, JPYC EX. The company registered as a money transfer service provider with the Financial Services Agency of Japan in August.

The phrase “Japan's first legally recognized” carries significant meaning. Japan's regulation of stablecoins is extremely strict; the revised regulations in June 2023 require service providers to register under the Fund Settlement Act and the Banking Act in order to issue or manage the circulation of stablecoins. The fact that JPYC has received approval from the Financial Services Agency of Japan demonstrates that its compliance framework, reserve management, and risk control have all met the high standards set by Japanese regulatory authorities.

The 100% yen deposits and government bond reserves are the core trust basis of the JPYC stablecoin. This reserve structure is similar to that of USDC, ensuring that every JPYC is backed by an equivalent amount of yen assets. The inclusion of government bonds not only provides security but also generates interest income for JPYC, which can be used to subsidize operating costs or distributed to token holders. In contrast, the reserve structure of USDT has been widely questioned, as Tether has never provided a complete audit report.

The JPYC stablecoin operates on blockchain networks such as Avalanche, Ethereum, and Polygon, making this multi-chain deployment strategy extremely important. Ethereum offers the largest DeFi ecosystem and liquidity, while Polygon, as Ethereum's Layer 2, provides low cost and high speed. Avalanche is known for its high performance and institutional-friendly features. Deploying across all three chains allows JPYC to reach different user groups and application scenarios.

The company stated that users can obtain JPYC through the JPYC EX platform after completing identity verification using the “My Number” card issued to citizens and residents in Japan. My Number is Japan's national identification system, and this KYC requirement ensures that JPYC complies with anti-money laundering (AML) and know your customer (KYC) regulations. Although this raises the usage threshold, it also provides compliance assurance for JPYC, allowing it to collaborate with traditional financial institutions and government agencies.

10 trillion yen ambition and integration ecosystem of ten thousand enterprises

The issuer of this stablecoin has set an ambitious goal of achieving a circulation of 10 trillion yen (65.4 billion USD) within three years and plans to expand the supported blockchains and partnerships with enterprises. In comparison, the current circulating supply of the world's largest stablecoin USDT is approximately 183.2 billion USD. From zero to 65.4 billion USD, JPYC aims to reach about 36% of USDT's current scale, which is an ambitious but not impossible target.

Japan is the fourth largest economy in the world, with a GDP exceeding 4 trillion dollars. If JPYC can capture a small portion of the domestic payment market in Japan, as well as the cross-border settlement needs of Japanese companies, a circulation of 65.4 billion dollars is achievable. The key lies in whether JPYC can provide a superior experience compared to traditional bank transfers: faster settlement speed, lower fees, 24/7 availability, and seamless integration with the DeFi ecosystem.

The company stated that several Japanese enterprises have announced plans to incorporate JPYC into their services. The fintech software company Densan System is developing a payment system that includes JPYC stablecoin for retail stores and e-commerce platforms. This B2B2C model is crucial as it allows ordinary consumers to use JPYC in their daily shopping without needing to understand blockchain technology. When consumers choose JPYC for payment at convenience stores or e-commerce platforms, the blockchain settlement in the background is transparent to them.

Asteria plans to add JPYC functionality to its enterprise data integration software, which is currently used by over 10,000 companies. This is one of the most significant enterprise adoption pathways for JPYC. Asteria's software is used for data exchange and business process automation within and between enterprises. Integrating JPYC into this platform means that these 10,000 companies can use JPYC for B2B payments and settlements, which will create huge transaction volumes and circulation demand for JPYC.

The crypto wallet HashPort also plans to support JPYC transactions. HashPort is a domestic crypto wallet in Japan, which provides users with access to JPYC. As more wallets and exchanges integrate JPYC, its liquidity and availability will continue to improve.

JPYC Corporate Cooperation Ecosystem:

Densan System: Developed JPYC payment system for retail stores and e-commerce platforms.

Asteria: Data integration software integrated with 10,000 enterprises.

HashPort: Cryptocurrency wallet supports JPYC transactions

Japan's stablecoin regulatory framework and competition with Sumitomo Mitsui Banking Corporation

The launch of the Japanese Yen stablecoin (JPYC) comes at a time when Japan is strengthening its regulation of the emerging stablecoin industry. In June 2023, Japan revised its stablecoin regulations, requiring service providers to register under the Fund Settlement Act and the Banking Act in order to issue or manage the circulation of stablecoins. This strict regulatory framework is among the leading levels globally, demonstrating Japan's importance and cautious attitude towards the stablecoin market.

Japan's regulatory approach stands in stark contrast to that of the United States. Although the U.S. is the largest market for stablecoins, there has been a lack of a federal regulatory framework, and inconsistent state regulations have led to high compliance costs. Japan has chosen to establish a clear regulatory framework at the national level, providing stablecoin issuers with a predictable legal environment, which is extremely important for corporate planning and investor confidence.

Several major financial institutions in Japan have begun exploring the issuance of stablecoins. For example, according to the Nikkei Shimbun, Sumitomo Mitsui Banking Corporation (SMBC) announced in April plans to collaborate with Ava Labs and Fireblocks to launch its own stablecoin. Sumitomo Mitsui Banking Corporation is one of Japan's three major banks, and its entry into the stablecoin market marks the recognition of blockchain payments by traditional financial institutions.

The competition between JPYC and Sumitomo Mitsui Banking Corporation will be the focus of the Japanese stablecoin market. As a fintech startup, JPYC has the advantages of flexibility and innovation, allowing it to quickly launch products and integrate new technologies. On the other hand, Sumitomo Mitsui Banking Corporation has the advantages of a large customer base, brand reputation, and regulatory resources. This “startup vs. traditional bank” competition will determine the future landscape of the Japanese stablecoin market.

From a more macro perspective, the launch of the Japanese Yen stablecoin is an important step in the global stablecoin market's shift from a US dollar dominance to diversification. Currently, USDT, USDC, DAI, and other US dollar stablecoins occupy an absolute dominant position in the market. Euro stablecoins (such as EUROC) and British Pound stablecoins are also developing, but their scale is far smaller than that of US dollar stablecoins. As the third largest currency in the world, the successful launch of the Japanese Yen stablecoin may encourage other countries (such as South Korea, Singapore, and Australia) to issue stablecoins for their own currencies.

For the global crypto market, the Japanese yen stablecoin provides a new source of liquidity and trading pairs. Currently, most crypto transactions are denominated in USDT or USDC, which exposes non-U.S. users to exchange rate risks. Japanese users trading with JPYC can eliminate the exchange rate fluctuations between the yen and the dollar, reducing transaction costs and risks. Additionally, JPYC can also serve as a tool for Japanese companies to conduct cross-border payments, particularly for trade settlements with other Asian countries.