World's first Stablecoin fully convertible to Yen, what makes it important in a country that loves cash

Japan takes a bold step into the digital currency era with the launch of the world's first Yen-pegged stablecoin by Japanese startup JPYC on Monday. This move marks a significant shift in a nation where cash and credit cards have long dominated financial transactions.

JPYC’s Stablecoin, fully convertible to the Yen and backed by domestic savings and Japanese government bonds (JGBs), aims to integrate blockchain technology into Japan's mainstream financial system. The launch follows U.S. President Donald Trump’s recent endorsement of the crypto sector, sparking renewed global interest in stablecoins -- digital currencies typically tied to fiat currencies for faster, cheaper transactions.Japan’s three megabanks are also reportedly preparing to issue their own Stablecoins, according to the Nikkei daily, potentially accelerating the adoption of digital assets in a country historically reliant on cash. Government data shows Japan’s cashless payment ratio has climbed to 42.8% in 2024, up from 13.2% in 2010, signaling a gradual embrace of digital payments.

Worries persist

However, concerns linger. Bank of Japan Deputy Governor Ryozo Himino warned last week that Stablecoins could bypass regulated banking systems, potentially undermining commercial banks’ role in global payments.

“Stablecoins might emerge as a key player in the global payment system, partially replacing bank deposits,” Himino said, urging regulators to adapt.JPYC plans to waive transaction fees initially to boost adoption, generating revenue from interest on JGB holdings. Yet, Tomoyuki Shimoda, a former Bank of Japan executive and current academic at Rikkyo University, remains cautious. “There’s uncertainty about whether yen Stablecoins will gain traction,” Shimoda said.

“Megabank involvement could speed things up, but widespread use may still be two to three years away.

”As Japan navigates this digital frontier, the JPYC launch signals a pivotal moment for the Yen in the global Stablecoin race, challenging traditional financial norms in a cash-loving nation.Globally, Stablecoins are gaining traction. The Bank for International Settlements notes that U.S. dollar-backed Stablecoins dominate, comprising over 99% of the global supply. Meanwhile, China is exploring yuan-backed Stablecoins, and South Korea has committed to allowing won-based versions, following Japan’s 2023 regulatory framework permitting Stablecoin issuance.