Yen Stablecoin Issuer Aims to Fill Japan’s Bond-Buying Void with $67 Billion Target
Japan’s first domestic yen stablecoin issuer, JPYC, has announced an ambitious plan. The firm aims at becoming a major new player in Japanese government bond (JGB) market. This is a project that might transform monetary policy. Therefore, this will be accompanied by the slowing of the large-scale JGB purchases by the Bank of Japan (BOJ). The BOJ is also now relaxing its ultra-loose policy position.
JPYC Aims to issue $67B stables.
JPYC is a Tokyo-based company that manages the first legal yen money that is pegged to stablecoin in Japan. Chief Executive Noritaka Okabe mentioned that the stable coin reserves can soon develop into significant purchasers of the JGBs. This will solely be determined by the tremendous growth of the stable coin market. Thus, the company has a challenging target of issuing the yen equivalent of 66-67 billion ( 10 trillion) in the next 3 years.
In addition, JPYC has revealed the elaborate plan of supporting its digital currency. The company intends to invest 80 percent of its proceeds of issuance in Japanese government bonds. The rest 20 percent will be contained in the domestic bank savings deposits. This framework makes sure that the stablecoin is convertible to the yen fully. Okabe observed that his company would majorly be involved in purchasing short-term securities. But at the same time he affirmed that in future he would take into consideration the buying of longer term JGBs. The company is negotiating this option with the government and legislators.
Regulator Caution and Megabank Trials Characterize the Development of the Market.
The larger strategy is to have the yen in the rapidly growing global stable coin market. U.S.-dollar-pegged coins in this market are highly dominated. Okabe also revealed that the three largest banks in Japan are going to conduct a joint experiment and issue stablecoins. To minimize compliance risks the Financial Services Agency (FSA) has developed an innovation sandbox. This will accelerate the adoption.
Nevertheless, the growth can be slow in the beginning even where the regulators are favorable. The policymakers warn that stablecoins may help transfer money outside of highly controlled financial institutions. This situation could decrease the critical position of business banks in the flow of payments all over the world. Nevertheless, with the BOJ shrinking its presence in the market (it now controls about 50 percent of ¥1,055 trillion of the JGB market) stablecoin reserves also have potential solution to fill in the bond-buying vacuum that will emerge. Finally, the partnerships that JPYC will be involved in will cause the flywheel of use cases and liquidity to speed up.