Japan megabanks target yen stablecoin launch

Japan's three largest banking groups plan to jointly issue a stablecoin by March 2027, marking one of the country's most significant efforts to expand the use of yen-denominated digital assets.

Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group said they will establish a council to develop operational frameworks and prepare for the issuance of the stablecoin.

The banks said they will act as joint settlors while a trust bank or similar institution will serve as trustee for the project.

The initiative follows support from Japan's Financial Services Agency, which signalled backing for a stablecoin developed by the three lenders in November, while the ruling Liberal Democratic Party has also advocated greater adoption of yen-based stablecoins.

Stablecoins are digital tokens pegged to traditional financial assets, most commonly fiat currencies, and are increasingly used for payments, trading and cross-border transfers.

The global stablecoin market remains heavily dominated by US dollar-backed tokens, with Tether's USDT and Circle's USDC accounting for about 84% of the sector's market value.

Yen-pegged stablecoins currently represent less than $50 million of the roughly $311 billion stablecoin market, highlighting the challenge facing Japan's banking sector as it seeks to build domestic alternatives to dollar-based digital currencies.