Stablecoins as Emerging Alternatives to Traditional Bank Deposits in Japan

Japan's financial landscape is undergoing a seismic shift as stablecoins emerge as viable alternatives to traditional bank deposits, driven by regulatory innovation and fintech disruption. The Bank of Japan (BOJ) and the Financial Services Agency (FSA) have crafted a 2025 regulatory framework under the Payment Services Act (PSA) that positions Japan as a global leader in regulated digital finance. This framework, which restricts stablecoin issuance to licensed banks, trust companies, and fund transfer service providers (FTSPs), has catalyzed a wave of yen-backed stablecoin projects led by banking giants like Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho, according to a Markets article. These initiatives are not merely speculative experiments but strategic moves to modernize corporate payments and reduce reliance on U.S. dollar-dominated stablecoins like USDT and USDC, according to a BeInCrypto piece.

Central Bank Policy: A Catalyst for Stablecoin Innovation

The BOJ's 2023 and 2025 PSA amendments have been pivotal. By requiring stablecoins to be fully redeemable and pegged 1:1 to the yen, the regulator has ensured that these digital assets remain tethered to the banking system. For instance, trust-type stablecoins can now hold up to 50% of their reserves in low-risk assets like short-term government bonds, balancing operational efficiency with stability, as noted in a JapanCompliance analysis. This approach has allowed institutions like JPYC, Japan's first licensed yen-backed stablecoin issuer, to thrive. JPYC's stablecoin, backed by bank deposits and Japanese government bonds, is designed to facilitate seamless transactions while maintaining a 101% collateralization ratio, according to a Cryptopolitan report.

The BOJ's monetary policy further amplifies this trend. With interest rate hikes anticipated by early 2026, the cost of holding traditional deposits may rise, incentivizing corporations and financial institutions to adopt stablecoins for liquidity management, according to Yahoo Finance. Prime Minister Sanae Takaichi's pro-crypto stance has also accelerated adoption; policymakers view stablecoins as tools for economic stimulus and global competitiveness, as reported by Yahoo Finance.

Fintech Disruption: Redefining Payment Systems

Fintech-driven innovations are reshaping Japan's payment infrastructure. The collaboration between MUFG, SMFG, and Mizuho on a yen-backed stablecoin built on MUFG's Progmat blockchain platform exemplifies this shift, according to Stablecoin Insider. Targeting ¥1 trillion in issuance over three years, the project aims to reduce transaction fees and administrative burdens for corporations. Meanwhile, fintech startups like JPYC and SBI VC Trade are leveraging the FSA's new FTSP license to offer real-time, low-cost cross-border settlements, as covered in a Dzilla report.

The impact on traditional banking is profound. While stablecoins are not replacing deposits outright, they are fragmenting liquidity. Japanese corporations now favor regulated stablecoins for their compliance with PSA and integration into ERP systems, as seen with Asteria's no-code tools, according to a CoinGradient article. Hokuriku Bank's adoption of SoftPOS systems further illustrates how stablecoins are reducing card fees and enhancing merchant efficiency, as covered by CoinGradient.

Quantifying the Shift: Stablecoins vs. Traditional Deposits

The data underscores a clear divergence. By October 2025, the market share of USDT and USDC in Japan had fallen from 91.6% in March 2024 to 83.6%, per Markets data. The stablecoin market itself has exploded, growing from under ¥1 trillion in 2020 to tens of trillions by 2025, according to Dzilla. In contrast, traditional bank deposits have stagnated, rising only marginally from ¥500 trillion in 2020 to ¥510 trillion in 2025, per Dzilla.

This growth is not without risks. While the BOJ's framework ensures that stablecoins remain anchored to the banking system, the potential for liquidity fragmentation remains. However, the requirement for stablecoin reserves to be held in bank deposits and government bonds mitigates this risk, ensuring that traditional banks retain a central role, as noted by JapanCompliance.

Conclusion: A New Era of Digital Finance

Japan's approach to stablecoins-balancing innovation with compliance-offers a blueprint for global markets. By embedding stablecoins within the existing financial infrastructure, the BOJ and FSA have created a system where digital assets complement rather than disrupt traditional banking. For investors, this signals a long-term opportunity in Japan's fintech ecosystem, particularly in institutions and startups that bridge the gap between legacy systems and blockchain-based solutions. As the yen-backed stablecoin market matures, it may even challenge the dominance of dollar-pegged alternatives, reshaping global remittances and cross-border trade, as noted by BeInCrypto.