Japan regulator warned stablecoin runs could spark a JGB fire-sale

An FSA study group member said a large issuer of electronic payment instruments — Japan's legal term for stablecoins — could face heavy redemption demands, and that unloading the government bonds behind those tokens might follow. The member asked the group to check whether current rules are strong enough to handle it. The Financial Services Agency published the minutes from the group's first meeting on digital and decentralized finance, held October 20.

The backdrop is a bond buyer stepping back. The Bank of Japan owns close to half of Japan's government bonds, carries roughly $7 trillion in debt and is cutting its purchases. JPYC founder and CEO Noritaka Okabe told the group that stablecoin reserves could be plowed into JGBs, offsetting the BOJ's smaller appetite. He said issuers could become major holders of Japanese government bonds within a few years.

JPYC launched its yen-linked token in October 2025 after changes to Japan's Payment Services Act. Okabe said 80% of the money the company takes in goes into government bonds, with the other 20% parked in bank savings. The issuer plans to start with short-term bonds and may add longer-dated ones depending on demand, aiming for 10 trillion yen (about $66 billion) of its token in circulation within three years, according to earlier Cryptopolitan reporting.

Token lending left members scratching their heads. One said that when a company lends out tokens while also issuing them, it can look like a pitch to invest money, and asked whether existing rules even cover it. Members also flagged that global interest in stablecoins appears to be fading as attention shifts to tokenized deposits — a turn driven partly by price swings and anti-money-laundering headaches that make stablecoins clumsy for cross-border transfers. Using a public blockchain, the minutes note, makes AML checks harder to trust.

Members said the system should spell out who is allowed to halt activity on a public blockchain during an incident and how much they can halt, or disclose that gap to users. They also questioned whether banks and other firms can safely hold assets on a public blockchain and hand them back to their owners. On decentralized exchanges and DeFi, one member said Japan should decide its approach before writing rules, while another said it needs to settle how it will answer the Financial Action Task Force's July report on DeFi. Members warned against letting Japan become a spot where people exploit weak or missing rules, and asked who acts as gatekeeper on these platforms.

Nomura Holdings (NYSE: NMR) and Securitize Japan spoke at the session, with Nomura requesting DeFi and wallet rules as flexible as those in other countries. The group met a second time on November 2. Separately, Japan's Finance Ministry kicked off its own study group on October 8 to look at tokenizing government bonds and pulling in new investors, as it faces a record budget request of 143 trillion yen (about $944 billion) and debt-servicing costs of around 36.64 trillion yen (about $242 billion).