Japan Big 3 banks’ stablecoin trial gets regulatory green light

A month after the launch of the first stablecoin pegged to the yen, Japan’s three largest banks have received the regulatory green light to conduct a trial on a joint stablecoin.

The Japanese Financial Services Agency (FSA) has approved an initiative by Sumitomo Mitsui Banking Corp., MUFG (NASDAQ: MUFG), and Mizuho Bank, allowing the three to launch a joint stablecoin. The three are the largest lenders in Japan with a combined $6.8 trillion in total assets.

Local business newspaper Nikkei first reported in mid-October that the three banks were exploring a stablecoin project together. The token will be issued on a DLT platform developed by Progmat, a digital asset infrastructure solutions provider founded by MUFG, NTT Data, and a handful of other local banks.

This trial, now dubbed the Payment Innovation Project (PIP), has received the FSA’s nod. In its announcement, the watchdog said that the approval reflects its commitment to promoting innovation in the payments space.

“We are pleased to announce that we have decided to support the following proof-of-concept experiment as the first project supported by the Payment Innovation Project (PIP)—the 11th project supported by the FinTech Proof-of-Concept Hub,” the FSA stated.

The regulator pledged to publish the results of the trial after completion, highlighting issues regarding compliance and regulatory supervision.

The first trial will test whether a stablecoin issued by multiple institutions can adhere to the strict banking and payments regulations, the FSA added.

Japan’s stablecoin race heats up

The three banks claim the new stablecoin will be used for both inter-company and intra-company settlements. They expect to launch the first version by March next year, with heated competition in the stablecoin sector, both from within Japan and abroad, forcing their hand.

Mitsubishi Corp., a sister company of MUFG, will be among the first large-scale users of the new stablecoin. The firm, which is the largest trading company in the country, will use the token for internal settlements among its 200+ subsidiaries. It also intends to use the stablecoin for international remittances, cutting transaction time and cost.

JPYC Inc., which issued the first yen stablecoin, believes the market will continue to grow. Speaking to Reuters this week, CEO Noritaka Okabe predicted that local stablecoin issuers would become among the largest buyers of the government’s bonds.

“With the BOJ [Bank of Japan] tapering bond buying, stablecoin issuers could emerge as the biggest holders of JGBs in the next few years,” he stated. “While authorities could try to control the duration of bonds stablecoin issuers buy, it would be hard for them to control the volume they hold. This will happen around the world. Japan is no exception.”

Saudi Arabia’s stablecoin receives industry support

While private firms champion stablecoin efforts in Japan, the government is spearheading innovation in Saudi Arabia.

The Saudi Arabian government is working on a stablecoin with the country’s Capital Markets Authority (CMA) and the central bank, as revealed last month by Majid Al-Hogail, the Minister of Municipalities and Housing.

Vivien Lin, the chief product officer at digital asset exchange BingX, says the stablecoin would elevate the country’s cashless payments sector. The upcoming token will operate within an established payments framework, which Lin says is a “progressive and risk-aware” approach.

Saudi Arabia’s payment systems have improved greatly in the past decade, with digital payments now accounting for 80% of all transactions. However, stablecoins can improve them further and “compress settlement from days to near-instant, cut cross-border costs, and improve traceability,” Lin added.

“Stablecoins can advance the financial ecosystem when embedded in rigorous regulatory frameworks and aligned with national values. We believe this pathway reflects the Kingdom’s commitment to modernization, consumer protection, and financial stability,” noted Michelle Daura, the head of regulated regions at Bybit, another digital asset exchange.

According to Chainalysis, stablecoins accounted for 46% of all digital assets received in Saudi Arabia in 2024.

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