Japan has long been at the forefront of cryptocurrency regulation, striving to balance innovation with consumer protection and financial stability. However, one persistent question among crypto users is: why can’t Japanese residents directly buy popular stablecoins like USDT or USDC using Japanese yen on domestic exchanges? The answer lies in a pivotal regulatory shift introduced in 2023 — Japan’s Stablecoin Act, officially known as the amendment to the Fund Settlement Law.
This article explores the legal, structural, and operational reasons behind this restriction, how it affects users, and what the future might hold for stablecoin adoption in Japan.
The 2023 Stablecoin Law: A Regulatory Turning Point
In June 2023, Japan enacted a major revision to its Fund Settlement Law, establishing a formal legal framework for stablecoins. This amendment marked Japan’s first dedicated legislation for digital stable assets and set clear criteria for which stablecoins can be legally issued and used within the country.
Key Requirements Under the New Law
- Eligible Issuers Only: Only licensed banks, trust companies, and registered fund transfer service providers can issue regulated stablecoins in Japan.
- Fiat-Backed Stability: Approved stablecoins must be pegged to the Japanese yen (JPY) and fully backed by high-quality, liquid reserves — such as cash deposits in regulated financial institutions.
- Redemption Guarantee: Users must be able to redeem their stablecoins for yen at face value, ensuring trust and minimizing counterparty risk.
- Exchange Compliance: Crypto exchanges and other intermediaries handling these stablecoins must verify compliance and adhere to strict anti-money laundering (AML) and know-your-customer (KYC) protocols.
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This framework was designed not just to foster innovation but to protect users from volatility and opacity — issues that have plagued some international stablecoins in the past.
Why USDT and USDC Don’t Qualify — For Now
Despite their global dominance, Tether’s USDT and Circle’s USDC do not currently meet Japan’s issuer requirements under the new law.
The Core Issue: Issuer Eligibility
- USDT is issued by Tether Limited, a company based outside Japan with no banking license in the country.
- USDC is managed by Centre, a consortium led by Circle and Coinbase — neither of which are recognized as Japanese financial institutions under the Fund Settlement Law.
Even though both stablecoins claim full reserve backing and undergo regular audits, Japan’s law prioritizes institutional accountability over technical design. In other words, it’s not enough for a stablecoin to be secure — it must also be issued by a regulated domestic entity.
Regulatory Caution from Japanese Authorities
The Financial Services Agency (FSA) and the Japan Virtual Currency Exchange Association (JVCEA) have adopted a cautious stance toward foreign-issued stablecoins due to:
- Concerns about reserve transparency
- Jurisdictional risks (e.g., U.S. regulatory actions affecting USDC)
- Potential systemic impact if a major stablecoin de-pegs
As a result, domestic exchanges like Coincheck and bitFlyer are prohibited from offering direct JPY-to-USDT or JPY-to-USDC trading pairs — a restriction strictly enforced to maintain compliance.
What Options Do Japanese Users Have?
While direct purchases aren’t allowed on local platforms, Japanese crypto users still have pathways to access USDT and USDC.
1. Use Overseas Exchanges
Many Japanese investors turn to international platforms that support JPY deposits or peer-to-peer trading. These services allow users to convert yen into USDT or USDC indirectly, though they come with higher regulatory and security risks.
2. Deposit Existing Stablecoins for Trading
Some Japanese exchanges may permit users to deposit already-owned USDT or USDC from external wallets and use them for cryptocurrency trading (e.g., buying Bitcoin or Ethereum). However, this depends on whether the exchange has obtained special permission — which remains rare under current guidelines.
3. Watch for Future Approvals
Recent developments suggest progress:
- Circle has announced expanded USDC access in Japan, including strategic investments and partnerships.
- SBI VC Trade, a licensed Japanese exchange, now allows users to purchase USDC directly with yen — indicating early signs of regulatory flexibility.
This shift may signal a gradual opening for compliant foreign stablecoins, especially if they establish local entities or partner with Japanese financial institutions.
The Rise of JPY-Backed Domestic Stablecoins
With global stablecoins restricted, Japan is fostering its own ecosystem of compliant, yen-backed digital currencies.
Examples include:
- JPYC by STASIS and GMO-Z.com
- MUFG Coin (now rebranded as “Bank of Tokyo-Mitsubishi UFJ Digital Currency”)
- SMBC Nikko’s J-Coin
These are issued by or in partnership with major Japanese banks and aim to function as digital cash within closed-loop payment systems or institutional networks.
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While adoption is still limited compared to global stablecoins, they represent Japan’s vision of a secure, regulated digital currency future — one tightly integrated with its existing financial infrastructure.
Frequently Asked Questions (FAQ)
Q: Can I buy USDT or USDC in Japan at all?
Yes — but not directly through most domestic exchanges using yen. You can acquire them via overseas platforms or peer-to-peer markets, then transfer them to a personal wallet or potentially deposit them on a Japanese exchange that allows such inflows.
Q: Is it illegal for Japanese users to own USDT or USDC?
No. There is no law prohibiting individuals from holding foreign-issued stablecoins. The restriction applies only to licensed exchanges offering direct yen trading pairs for non-compliant stablecoins.
Q: Will USDC ever be available on Japanese exchanges?
It already is — partially. SBI VC Trade now offers USDC purchases with yen, following coordination with regulators. This suggests Circle is working toward full compliance, possibly through local partnerships.
Q: Are Japanese stablecoins safer than USDT or USDC?
They are designed to be more compliant with local regulations and redemption guarantees, making them less exposed to jurisdictional or legal risks within Japan. However, global stablecoins often offer greater liquidity and transparency through third-party audits.
Q: Could Japan change its stablecoin rules in the future?
Possibly. As global standards evolve (such as MiCA in Europe), Japan may revise its approach to include foreign stablecoins that meet equivalent safeguards — especially for cross-border payments.
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Final Thoughts: Innovation Within Boundaries
Japan’s restriction on buying USDT and USDC with yen isn’t arbitrary — it reflects a deliberate effort to control risk while encouraging responsible innovation. By requiring stablecoin issuers to be regulated financial institutions, Japan ensures accountability, stability, and consumer protection in an otherwise volatile space.
While this creates short-term friction for users seeking global exposure, it also lays the groundwork for a resilient digital currency ecosystem rooted in trust.
As partnerships form and compliance frameworks adapt, we may soon see a hybrid model where both domestic and internationally recognized stablecoins coexist — under Japan’s watchful eye.
For now, understanding these regulations isn’t just about compliance; it’s about navigating the future of money in one of Asia’s most sophisticated financial markets.
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