Japan’s first domestic stablecoin issuer said digital asset companies could soon become important players in Japan’s sovereign debt market and reshape monetary policy.
Tokyo-based JPYC, which is developing Japan’s first yen-pegged stablecoin, said the issuer could evolve into a major buyer of Japanese government bonds (JGBs) as its reserves increase.
In comments reported by Reuters, JPYC founder and CEO Noritaka Okabe said stablecoin reserves could fill the hole created as the Bank of Japan slows its bond purchases.
The Tokyo-based startup began issuing yen-backed tokens (also known as JPYC) on October 27 under the country’s revised Payment Services Act, the first legal framework for stablecoins. The company has so far issued approximately $930,000 worth of tokens and aims to reach $66 billion in circulation within the next three years.
The token is backed by a combination of bank deposits and government bonds and is fully convertible into yen. It is also designed to move seamlessly between blockchain rails.
Stablecoin issuers as new bond buyers
Okabe said JPYC plans to invest 80% of its issuance proceeds in government bonds and leave the remaining 20% in bank deposits, initially focusing on short-term securities. He added that the company may consider longer-term government bonds in the future as demand grows and yields remain attractive.
This kind of allocation could give stablecoin issuers an important role in Japan’s bond market, where the Bank of Japan still holds about half of the $7 trillion government bond market. New buyers will need to absorb the issuance as central banks slow bond purchases.
For this reason, Okabe floated the idea that stablecoin reserves could naturally fill some of the void and link blockchain adoption to financial financing.
“The amount of government bonds purchased by stablecoin issuers will be determined by the balance between stablecoin demand and supply,” he said, noting that this trend “will occur all over the world,” and Japan is no exception.
Related: Visa pilots fiat-funded stablecoin payments for U.S. businesses
Adoption of stablecoins in Japan
Okabe’s comments come as stablecoin adoption continues in Japan’s traditional financial sector.
On Friday, Japan’s financial regulator, the Financial Services Agency (FSA), approved a yen-pegged stablecoin project led by Japan’s largest financial institutions.
The Financial Services Agency announced the Payment Innovation Project, an initiative involving Mizuho Bank, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi Corporation and its financial division, and MUFG’s stablecoin issuance platform Progmat.
Regulators announced that the two companies will begin issuing stablecoins for payments starting this month.
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