Japan FSA Seeks Input on Bond Eligibility for Yen Stablecoin Reserves

Japan’s Financial Services Agency (FSA) opened a public consultation on 27 January 2026 to define which bonds can back yen‑pegged stablecoins under the amended 2025 Payment Services Act. The 31‑day comment period runs until 27 February 2026. The draft guidance narrows eligible foreign bonds to those rated at the top of Japan’s domestic scale (grades “1” or “2”) and issued by entities with at least ¥100 trillion in outstanding debt, effectively limiting eligibility to very large issuers. Under the same framework, stablecoin issuers must hold customer assets as trust beneficiary interests backed by specified instruments such as bank deposits, Japanese government bonds (JGBs) and designated high‑grade bonds; reserves must be kept in segregated custody with licensed custodians. Only licensed banks, trust companies and registered money transfer agents may issue stablecoins, and foreign stablecoins can be offered via licensed intermediaries subject to extra compliance checks. Japan’s first fully regulated yen stablecoin, JPYC, launched in October 2025 using bank deposits and JGBs for backing. Analysts say the stricter bond eligibility could shift issuer demand toward JGBs, potentially affecting JGB market demand if stablecoin issuance scales up. For traders, the rules clarify counterparty and reserve‑quality risks, raise licensing barriers to new issuance, and set a near‑term timeline (comment period to Feb 27) that could influence stablecoin flows, on‑ramp liquidity, and JGB demand in Japan and the region.