Japan FSA Backs Megabank Stablecoin Initiative
Japan’s Financial Services Agency has officially endorsed a groundbreaking stablecoin pilot project involving the country’s three largest banks. The consortium unites Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMBC), and Mizuho Financial Group to drive digital payment innovation using blockchain technology.
The initiative marks the first project under the FSA’s newly launched Payment Innovation Project (PIP) and signals a major shift in Japan’s approach to regulated digital finance. The collaboration marks a significant milestone for the country’s financial sector as it modernizes payment infrastructure and enhances transaction efficiency.
FSA Approval Launches Yen-Backed Stablecoin Pilot
On Friday, the FSA announced the experiment in a statement, stating that it will test how multiple banking institutions can jointly issue stablecoins classified as electronic payment instruments under Japanese law. The project aims to verify whether such a system can be executed lawfully and appropriately in accordance with existing financial regulations.
The pilot is scheduled to run from November 2025 and will assess both legal and technical standards for shared stablecoin issuance among major banks. Results from the experiment, including legal and compliance insights, will later be published on the FSA’s website.
The consortium extends beyond the three megabanks. Mitsubishi Corporation, Progmat Inc., and Mitsubishi UFJ Trust and Banking Corporation are also participating in the initiative. Progmat offers issuance infrastructure for the stablecoin, while Mitsubishi UFJ Trust and Banking Corporation is expected to perform the trust functions.
How Japan’s Stablecoin Project Transforms Payment Systems
The stablecoin will be pegged to both the Japanese yen and the US dollar. The three banks, which together serve more than 300,000 business partners, are collaborating to build a unified platform that reduces transaction costs and streamlines payments.
The system aims to make both domestic and international settlements faster and cheaper, addressing the inefficiencies of existing cross-border payment infrastructure. The banks are building the platform on MUFG’s Progmat network, designed to support digital securities and regulated stablecoin issuance.
The new stablecoin will initially be used by Mitsubishi Corporation for settlement purposes, paving the way for wider adoption across industries. Full-scale practical application is expected within the current fiscal year.
Regulatory Framework Guides Megabank Stablecoin Development
Designed to meet Japan’s financial regulations, Progmat provides the necessary compliance framework and transparency to satisfy the FSA. Through Progmat, the participating banks can issue tokenized financial instruments, ensuring that transactions remain secure and compliant.
Stablecoins are classified as electronic payment instruments in Japan, which means they must comply with the country’s financial regulations. The FSA plans to release findings regarding the legal and compliance aspects of the experiment.
The pilot operates under the FSA’s FinTech Proof-of-Concept Hub, active since 2017. The regulatory oversight ensures that blockchain innovation proceeds within established financial safeguards while testing new digital payment models.
Japan Positions Itself in Digital Currency Competition
Japan is modernizing its financial infrastructure and collaborating to compete with regional leaders like Hong Kong, South Korea, and China, all of which are advancing their digital currency projects.
Officials described the project as part of a broader national effort to ensure Japan’s payment systems remain competitive as blockchain-based finance expands globally. While the country remains cautious about speculative crypto assets, it is clearly positioning itself to lead in regulated digital finance.
The stablecoin market has experienced substantial growth in recent years. Stablecoins have experienced considerable growth over the last two years, surpassing $300 billion in market cap last month. Japan’s entry into this space through its largest financial institutions demonstrates confidence in regulated digital assets.
Conclusion
The FSA-backed stablecoin pilot represents a calculated move toward digital payment transformation in Japan. With regulatory support and participation from the country’s financial giants, the project establishes a framework for blockchain-based payments within established legal boundaries. The experiment’s outcomes will shape future digital currency policies and accelerate mainstream adoption of stablecoin technology across Japanese financial markets.
