Japan is poised to enter a new era in its digital asset landscape with upcoming amendments to its Payment Services Act, expected to take effect in 2025. The revised legislation will formally allow regulated cryptocurrency exchanges to list and trade major stablecoins such as Tether (USDT) and USD Coin (USDC), marking a significant shift in the country’s cautious approach to crypto regulation.
This move reflects Japan’s growing recognition of stablecoins as essential infrastructure in the global financial ecosystem. By establishing a clear legal framework, the government aims to foster innovation while maintaining strict oversight to protect investors and prevent financial crimes.
👉 Discover how Japan’s new crypto rules are shaping the future of digital finance.
A Regulatory Framework for Stability and Trust
At the heart of the updated law is the introduction of a stablecoin issuance and circulation registration system. Under the new rules, only licensed financial institutions—such as banks, registered money transfer agents, and trust companies—will be permitted to issue yen-, dollar-, or other fiat-pegged stablecoins.
This requirement ensures that stablecoin operators meet high standards of accountability, transparency, and capital adequacy. Regulators are particularly focused on mitigating systemic risks associated with digital assets, especially those linked to fiat currencies. By limiting issuance rights to well-established and supervised entities, Japan aims to prevent scenarios where unstable or unbacked tokens could threaten market integrity.
Additionally, the framework strengthens anti-money laundering (AML) and know-your-customer (KYC) protocols. These measures address long-standing concerns from Japan’s Financial Services Agency (FSA), which has historically blocked stablecoin trading due to fears over illicit fund flows and insufficient oversight.
Until now, none of the 31 FSA-registered crypto exchanges in Japan have been allowed to offer stablecoin trading pairs—a testament to the regulator’s risk-averse stance. With these reforms, however, that restriction is set to lift, opening doors for both domestic and international players.
Global Players Respond to Japan’s Evolving Market
The timing of this regulatory shift comes amid broader changes in how global crypto firms engage with Japan’s market. Notably, San Francisco-based exchange Kraken exited the Japanese market in 2023, citing increasing compliance demands and unfavorable economic conditions.
Kraken announced it would cease operations for Japanese users by October 31, 2023, and formally withdrew its registration from the Japan Financial Services Agency (JFSA). In a blog post, the company stated that continuing to operate in Japan no longer made strategic sense given the resources required to maintain compliance amid a cooling global crypto market.
Japanese users were instructed to withdraw their fiat balances and cryptocurrencies by the deadline. They could either transfer funds to external wallets or liquidate their portfolios and deposit proceeds into local bank accounts.
While Kraken's departure signaled challenges under tighter regulation, the new stablecoin rules suggest Japan is not closing its doors—but rather redefining them. The updated framework may encourage more compliant platforms to re-enter or expand in Japan, especially those offering regulated stablecoin services.
👉 See what it takes for a crypto platform to succeed in Japan’s regulated environment.
Empowering Innovation with International Access
One of the most forward-looking aspects of the amendment is its provision allowing overseas firms to issue stablecoins in Japan through partnerships with licensed digital asset custodians. This opens a pathway for foreign issuers to participate in Japan’s financial ecosystem without needing full local incorporation.
For example, a U.S.-based stablecoin issuer could collaborate with a Japanese trust company to launch a yen-pegged digital token compliant with local laws. This model promotes cross-border financial integration while preserving regulatory control.
Such flexibility positions Japan as a potential hub for Asia-Pacific stablecoin adoption, bridging traditional finance with decentralized systems. It also aligns with broader G20 discussions on regulating global stablecoin projects, showing Japan’s commitment to international coordination.
Why Stablecoins Matter for Japan’s Economy
Stablecoins are more than just trading tools—they represent a transformation in how value moves across borders. For Japan, a nation with advanced fintech infrastructure and strong consumer protection norms, embracing regulated stablecoins can bring tangible benefits:
- Faster cross-border payments: Businesses and individuals can send and receive money globally with lower fees and near-instant settlement.
- Enhanced financial inclusion: Stablecoins can serve underbanked populations through mobile access, especially when integrated with digital wallets.
- Support for Web3 innovation: Developers building decentralized applications (dApps), NFT platforms, or blockchain games need reliable, low-volatility currencies to function effectively.
Moreover, by regulating rather than restricting stablecoins, Japan avoids pushing activity into unregulated shadows—an outcome that benefits both users and authorities.
Frequently Asked Questions (FAQ)
Q: What stablecoins will be allowed in Japan?
A: Initially, only fiat-backed stablecoins like USDT (Tether) and USDC (USD Coin) issued by licensed institutions will be permitted. Cryptocurrency-collateralized or algorithmic stablecoins are unlikely to qualify under current rules.
Q: Can any company issue stablecoins in Japan?
A: No. Only licensed banks, registered money transfer agents, and trust companies can issue stablecoins. Overseas firms must partner with approved Japanese custodians.
Q: Are there consumer protections for stablecoin holders?
A: Yes. Issuers must maintain full reserves and undergo regular audits. Funds must be segregated from operational assets to protect users in case of insolvency.
Q: Will this boost crypto adoption in Japan?
A: Absolutely. Allowing stablecoin trading removes a major barrier for traders and institutions. It also encourages innovation in DeFi, payments, and blockchain-based services.
Q: How does this affect existing exchanges?
A: Exchanges must upgrade their systems to support stablecoin listings and comply with enhanced AML/KYC checks. Those that adapt quickly may gain competitive advantage.
Q: Is this related to Japan’s central bank digital currency (CBDC)?
A: Not directly. This law governs private-sector stablecoins. However, it complements the Bank of Japan’s ongoing CBDC research by building foundational digital payment infrastructure.
Japan’s decision to embrace regulated stablecoins signals a balanced approach: encouraging technological progress without compromising financial stability. As one of Asia’s most sophisticated financial markets, its choices will influence regional policy trends.
With clearer rules in place, investors, developers, and financial institutions can now plan with greater confidence. Whether you're exploring digital asset investments or building blockchain solutions, understanding Japan’s evolving stance is crucial.
👉 Stay ahead of Asia’s crypto evolution—explore secure trading options today.