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As dollar-backed stablecoins continue their stranglehold on the global market (dominating 99% of the $286 billion sector), Japan just made a move that could finally give Asia its own digital currency heavyweight.
Tokyo-based fintech startup JPYC launched the world’s first fully regulated yen-pegged stablecoin on October 27, marking what could be a turning point for investors tired of relying solely on US dollar-denominated digital assets in an increasingly multipolar financial world.
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The JPYC stablecoin maintains a strict 1:1 peg to the Japanese yen and operates under the Japanese Payment Services Act, backed by domestic savings and Japanese government bonds. But what distinguishes this from similar experiments in South Korea, Taiwan and elsewhere in Asia is simple: the yen is freely convertible globally.
That’s important because China, South Korea and Taiwan have considered stablecoin projects, but their currencies face restrictions that limit international circulation. The yen has no such problem: it is the third most traded currency in the world and accounts for almost 17% of global currency transactions, according to Reuters.
“We hope to stimulate innovation by giving startups access to low transaction and settlement fees,” CEO Noritaka Okabe told Reuters.
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JPYC plans to issue 10 trillion yen ($64.9 billion) in the stablecoin over three years and will not charge transaction fees initially. Instead, the company will generate income from interest earned on its holdings of Japanese government bonds, a sustainable model given that JGBs currently yield more than 3% over the long term, Reuters reported.
Here’s where things get interesting for traders: the USD/JPY currency pair is one of the most traded in the world, with the US dollar involved in 89% of all transactions and the Japanese yen at 16.85%, according to Reuters.
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With both the US and Japan now regulating fiat-pegged stablecoins, there is potential for a thriving on-chain USD/JPY market that combines dollar- and yen-pegged stablecoins on decentralized exchanges. That could reduce transaction costs and settlement times for the hundreds of billions of dollars traded daily in this currency pair.