Stablecoins in Japan: Exploring New Frontiers in Digital Finance

GMO-Z.com Trust Company
GMO-Z.com Trust Company
7 min readMay 27, 2024

Stablecoins are a breakthrough in the global financial landscape that connects traditional fiat currencies with the rapidly evolving world of digital assets. Japan, known for its economic and technological prowess, is at the forefront of this innovation, notably given its significant role in the global foreign exchange market. There is a growing interest in stablecoin applications driven by technological advancements and changing market needs.

Today, our headquarters, GMO Internet Group, announced the partnership with Nomura Holdings and its subsidiary, Laser Digital. The partnership aims to examine the potential of issuing and utilizing stablecoins in Japan and explore the possibility of providing stablecoin-as-a-service to Japanese businesses. With the partnership, GMO Internet Group and Nomura Holdings will leverage the strengths of both groups to navigate the complexities of the Japanese financial market while promoting innovation and expanding the use of digital currencies.

This article will delve into the potential demand for stablecoins in Japan from the perspectives of economics, technological advancements, and regulatory frameworks, and explore how this partnership will leverage our strengths to seize opportunities and drive the development of the financial landscape.

Economic Perspective on Demand and Innovation

Demand for Stablecoins in the Japanese Macroeconomy

Key macroeconomic indicators like the M1 money supply and forex transaction volumes demonstrate the potential for stablecoins in Japan. The Japanese yen, one of the top three most traded currencies globally, accounts for approximately 17% of all forex transactions. The significant forex activity emphasizes the yen’s crucial role in the global economy. It highlights the substantial opportunity for stablecoins to make currency exchanges and international transactions more efficient and cost-effective. By providing stability and reducing the friction typically associated with currency exchange, stablecoins can enhance the efficiency of cross-border payments and remittances.

The relationship between stablecoins and the M1 money supply further illustrates the potential for stablecoin adoption. In March 2024, the United States’ M1 money supply reached $17.997 trillion, with the total circulating supply of major USD-backed stablecoins amounting to $146.85 billion, representing 0.82% of the M1. Meanwhile, the stablecoin market has experienced significant growth over the years. The supply of USD-backed stablecoins increased from $6.27 billion in 2020 to $146.85 billion in 2024, showing a rise in the ratio compared to M1 from 0.15% to 0.82%. The upward trend underscores the growing significance and potential of stablecoins in the financial system.

The U.S. M1 Supply Amount. Data Source: the Block

*USD-backed Stablecoin: USDT, USDC, USDD, TUSD, PYUSD, UST, USDP, BUSD, ZUSD

Similarly, Japan’s M1 money supply stands at an impressive 108 trillion JPY, suggesting a vast potential market for stablecoins, given the right conditions. With Japan’s advanced financial technology and robust blockchain infrastructure, the environment favors stablecoins’ rapid adoption and growth. Moreover, Japan is vigorously pushing for digital transformation to revolutionize payment systems, such as improving transaction speeds and reducing costs in cross-border scenarios. These efforts are expected to significantly boost economic efficiency and promote financial inclusivity, thereby providing a more favorable environment for the development of digital finance.

Technological Innovations and Regulatory Environment

The innovative environment of Japan’s fintech and blockchain sectors, with supportive government policies and a forward-thinking approach to digital currency integration, sets the stage for stablecoins to revolutionize financial services and digital entertainment.

The Japanese government has actively fostered an environment conducive to digital and financial innovation by implementing progressive policies and regulatory reforms. For example, the establishment of the “Web3 Policy Office” and various supportive measures, such as regulatory sandboxes, which allow companies to test financial technologies under certain conditions without immediate regulatory changes, facilitate the adoption of cutting-edge technologies and provide a robust support system for the proliferation of stablecoins.

Furthermore, Japan’s move to increase the ratio of cashless payments to 40% by 2025 exemplifies its ambition to revolutionize the payment landscape, making it ripe for stablecoin integration. Such advancements improve transaction speeds and reduce costs associated with traditional banking, especially for cross-border transactions. This shift is expected to dramatically expand financial services, integrating more seamless and cost-effective transaction methods into everyday use.

Web3 and Blockchain Gaming Innovations

In addition to traditional financial applications, stablecoins can also benefit the burgeoning sector of Web3 and blockchain gaming. In recent years, major gaming and technology firms in Japan have increasingly invested in Web3 solutions, including developing blockchain games or partnering with Web3 companies. These firms leverage popular intellectual properties to create immersive gaming experiences incorporating NFTs and cryptocurrency transactions.

Integrating stablecoins in gaming ecosystems allows for seamless and low-cost in-game transactions, enhancing user experience and enabling players to manage digital assets more efficiently and securely. Japan, along with other Asian countries, has led this space with its robust gaming industry and regulatory approaches supporting the development of decentralized gaming economies.

The Partnership Between GMO Internet Group and Nomura Holdings

The partnership between GMO Internet Group, Nomura Holdings, and Laser Digital, combines profound expertise in blockchain technology, compliance, risk management, and operational excellence.

As a GMO Internet Group subsidiary, GMO Trust is strategically positioned to leverage our technological expertise and regulatory experience in the stablecoin market. For over three years, we have issued fully backed U.S. dollar and Japanese yen stablecoins, respectively ZUSD and GYEN. Regulated by the New York Department of Finance Service as a limited purpose trust company, our stablecoins are now available for transacting on multiple blockchains, such as Ethereum, Stellar, and Solana.

Meanwhile, the partnership with Nomura Holdings and its subsidiary, Laser Digital, enhances our collective strengths. Nomura Holdings’s full licensing to support stablecoin issuance in Japan complements our technological innovations. Laser Digital brings extensive experience in digital asset trading and asset management, enriching the partnership’s strength with deep market insights and robust risk management strategies.

The synergy between GMO Internet Group and Nomura Holdings leverages these unique strengths, enabling adherence to strict regulatory standards and introducing innovative financial products and services. This partnership is poised to drive economic and social benefits by enhancing the accessibility and utility of digital assets in Japan’s financial ecosystem.

Exploring Stablecoin-as-a-Service to Address Market Challenges

In Japan, issuing stablecoins involves navigating a stringent legal framework. Financial institutions permitted to issue stablecoins, such as banks, trust banks, and licensed money transfer companies, must ensure the stablecoins are fully backed by cash or other highly liquid assets stored within domestic banks. These regulations ensure market stability, protect investors, and increase operational complexity and cost.

The rigorous Japanese regulatory landscape requires that all stablecoin transactions are monitored under tight supervision to comply with anti-money laundering (AML) and counter-terrorism financing (CFT) standards. Additionally, issuers must develop highly secure technological platforms to mitigate potential cybersecurity threats and accommodate operational disruptions.

GMO Internet Group’s partnership with Nomura Holdings strategically explores the stablecoin-as-a-service (SaaS) concept, an innovative approach that will set new digital financial services industry standards. With tailored stablecoin solutions, small and medium business entities will be able to integrate blockchain technology effortlessly into their existing systems without significant investments.

At this preliminary stage, our joint efforts will center around comprehensive market research, technological evaluation, and stringent regulatory compliance analysis. The initial work will explore the potential of providing streamlined processes that comply with the rigorous Japanese regulatory framework, which can effectively mitigate associated risks.

Looking into the Future

As Japan’s regulatory framework continues to evolve and the market’s acceptance of digital finance technologies grows, we see a substantial opportunity for stablecoins to play a pivotal role in the country’s economic digital transformation. With the integrated strengths and strategic alignment, the partnership is well-prepared to navigate the evolving regulatory landscape and capitalize on emerging opportunities. We look forward to playing a supportive role in the broader ecosystem, helping to shape the future of digital finance in Japan in a secure, compliant, and innovative way.

About GMO-Z.com Trust Company

GMO Trust connects traditional finance and blockchain technology for everyone. We issue GYEN, the world’s first regulated Japanese Yen stablecoin, and ZUSD, our trusted U.S. Dollar stablecoin. Visit our website to learn more.

Disclaimer

This content is not financial advice, and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency, or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.

We strongly advise our readers to conduct their own independent research before engaging in any such activities. GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in their country.

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GMO-Z.com Trust Company
GMO-Z.com Trust Company

Connecting traditional finance and blockchain technology for everyone. We issue GYEN, the first regulated JPY stablecoin, and ZUSD, our trusted USD stablecoin.