Japan's three major banks team up to launch a stablecoin! Official endorsement from the Financial Services Agency, launching in November

Japan’s Financial Services Agency (FSA) officially announces support for a pilot project involving stablecoins with the country’s three major banks, marking a significant step forward in Japan’s payment innovation efforts. The trial brings together Mizuho Bank, Mitsubishi UFJ Financial Group (MUFG), and Sumitomo Mitsui Banking Corporation (SMBC), aiming to jointly issue a stablecoin for payment purposes through collaborative efforts. The alliance also includes Mitsubishi Corporation, Progmat, and Mitsubishi UFJ Trust and Banking Corporation.

Official Endorsement by Japan’s FSA: Stablecoin Pilot Launches

(Source: Japan’s Financial Services Agency)

On Friday, the FSA issued a statement saying that the trial will explore how multiple banking groups can jointly issue a stablecoin classified as an “electronic payment instrument” under Japanese law, while ensuring compliance with regulations and proper operational standards. The FSA stated that the project aims to verify whether such systems can be operated “legally and appropriately” under existing financial laws.

This kind of official endorsement is rare in the global stablecoin regulatory environment. Unlike regions such as the US and Europe, which adopt cautious or restrictive attitudes toward stablecoins, Japan has chosen to actively support traditional financial institutions entering this space, demonstrating a proactive stance toward digital payment innovation. Japan’s classification of stablecoins as “electronic payment tools” rather than securities or commodities removes legal barriers to direct issuance by banks.

The FSA emphasized that the project is expected to continue from November 2025 until further notice. The results, including legal and compliance insights, will be published later on the FSA website. This transparent sharing of experimental outcomes could serve as a valuable reference for regulators in other countries and promote the maturation of global stablecoin regulatory frameworks.

This pilot project is the first initiative under the newly established Payment Innovation Program (PIP) by the FSA. Launched last Friday, PIP is a dedicated effort to accelerate blockchain-based payment innovations. It falls under the existing FinTech Concept Verification Center, which has supported FinTech experiments since 2017. This gradual regulatory approach reflects Japan’s long-term strategic planning and systemic thinking in the digital finance sector.

The Three Major Banks’ Alliance: A Historic Collaboration in Japan’s Financial Infrastructure

Mizuho Bank, Mitsubishi UFJ Financial Group, and Sumitomo Mitsui Banking Corporation are dominant players in Japan’s financial system. With total assets exceeding trillions of dollars, they serve the vast majority of Japanese businesses and consumers. Their decision to collaborate on issuing a stablecoin, rather than acting independently, is driven by strategic considerations.

First, joint issuance can create network effects. If each bank issues its own stablecoin, incompatible payment systems could emerge, increasing costs for merchants and consumers. A jointly issued stablecoin can circulate seamlessly among the three banks’ customers, immediately covering most of Japan’s population and businesses, forming an instant payment network.

Second, sharing technical and regulatory costs is advantageous. Developing blockchain infrastructure, adapting to regulatory frameworks, and integrating with existing banking systems require substantial investment. By sharing these costs, the banks can significantly reduce individual risk exposure and accelerate deployment.

Third, establishing industry standards. When Japan’s three largest banks collaboratively set technical standards and operational protocols for stablecoins, these standards are likely to become de facto standards for the entire Japanese financial industry. Smaller banks and financial institutions entering the stablecoin space will need to adopt or reference this system, consolidating the dominant position of the three banks.

Additional members of the alliance include Mitsubishi Corporation, Progmat, and Mitsubishi UFJ Trust and Banking Corporation. Mitsubishi Corporation’s participation suggests potential use cases for large-scale corporate trade settlements. Progmat’s focus on securities tokenization indicates possible integration with digital securities ecosystems. Mitsubishi UFJ Trust and Banking’s involvement ensures expertise in trust and custody services.

Unique Positioning of Japan’s Stablecoins: Electronic Payment Tools, Not Securities

Under Japanese law, this type of stablecoin is classified as an electronic payment instrument. This categorization is significant in the global regulatory landscape. In the US, the SEC has attempted to classify certain stablecoins as securities, imposing strict securities regulations. In Europe, the Markets in Crypto-Assets (MiCA) regulation enforces capital adequacy and reserve requirements on stablecoin issuers.

Japan’s designation of stablecoins as electronic payment tools means their regulatory framework aligns more closely with electronic money or prepaid cards rather than securities or bank deposits. This classification has several key implications. First, issuance barriers are lower; banks do not need new licenses or additional capital requirements and can issue stablecoins under existing banking licenses. Second, usage scenarios are more flexible; as payment tools, stablecoins can be used broadly for retail payments, cross-border remittances, and corporate settlements without many restrictions associated with securities trading.

However, defining stablecoins as “electronic payment tools” also means that holders’ rights differ from those of bank deposits. In Japan, bank deposits are protected by deposit insurance, with a maximum coverage of 10 million yen per depositor if a bank fails. Electronic payment tools may not enjoy similar protections, requiring issuing banks to establish independent reserve management mechanisms to ensure 1:1 redemption capability.

The FSA’s regulatory focus will be on ensuring compliance with rules and proper operational standards. This includes AML and KYC compliance, transparency and security of reserve assets, and the reliability of redemption mechanisms. The pilot will test whether these regulatory requirements can be effectively implemented in practice and whether existing laws need adjustments to accommodate stablecoin features.

Global Perspective: Strategic Significance of Japan’s Stablecoin Pilot

This collaboration is viewed as a key step toward modernizing Japan’s financial infrastructure and enabling faster, more efficient digital transactions among institutions. While Japan’s interbank payment system is reliable, it lags behind emerging digital payment technologies in speed and cost. Traditional bank transfers can take hours or days, and cross-border payments often take days with high fees.

Blockchain-based stablecoins can enable 24/7 real-time settlement, significantly reducing payment costs. For businesses, this could mean improved supply chain finance efficiency and faster accounts receivable turnover. For individuals, especially foreign workers in Japan sending remittances home, costs could drop from 5-10% to less than 1%.

Three Strategic Goals of Japan’s Stablecoin Pilot

Modernize Financial Infrastructure: Improve interbank payment efficiency, achieve real-time settlement, and enable 24/7 availability

Enhance International Competitiveness: Maintain Japan’s fintech leadership amid competition from China’s digital yuan and Europe’s digital euro

Explore New Business Models: Provide infrastructure for digital securities, supply chain finance, and IoT payments

From a global perspective, Japan’s pilot has a demonstration effect. If successful, it could accelerate other developed countries’ efforts to promote bank-led stablecoin projects. Unlike stablecoins issued by tech companies or crypto-native firms, bank-issued stablecoins offer higher regulatory compliance and systemic stability, making them more acceptable to regulators and traditional financial institutions.

The FSA’s announcement confirms details reported earlier by Nikkei News, indicating that the project has been in planning for some time and was not a rushed decision. Since establishing the FinTech Concept Verification Center in 2017, Japan has been steadily advancing its digital finance agenda. This long-term, systematic approach could position Japan as a leader in stablecoins and digital payments.