Fintech 2025

JAPAN Trends and Developments Contributed by: Keiji Tonomura, Shu Sasaki, Kazuyuki Ohno and Otoki Shimizu, Nagashima Ohno & Tsunematsu

the definition of “securities” under the Financial Instruments and Exchange Act (FIEA) under the current law. Accordingly, the disclosure require - ments under the FIEA do not apply to the issu - ance of Trust Beneficiary Interest Stablecoins. Furthermore, generally, registration as a financial instruments business operator under the FIEA is not required for trading Trust Beneficiary Interest Stablecoins. The prospect of monetisation is a major busi - ness concern when entering the payment busi - ness, including the issuance of stablecoins. Given that the current law requires issuers of Trust Beneficiary Interest Stablecoins to main - tain all funds received from users in deposit form, profitability for issuers is hindered. In light of this limitation, the government’s ruling party established a Web3 project team to discuss amendments to the current legislative regime, and in April 2024, this team published the “Web3 White Paper 2024” . In the White Paper, as one of the “issues to be immediately addressed for the promotion of Web3,” it was proposed that consideration should be given as to whether to permit government bonds to be included in the trust assets of Trust Beneficiary Interest Stable - coins. The JFSA seems to pay attention to regu - latory developments in foreign jurisdictions and the 2025 Report mentioned that similar regula - tory developments in the United States and the European Union have permitted or proposed to permit the investment of backing assets for sta - blecoins in assets other than deposits, including government bonds. In light of these domestic and international developments, the 2025 Report proposed the following revisions to the current legislative regime.

• Permit Trust Beneficiary Interest Stablecoins issuers to invest funds received from users in government bonds, which are considered to carry minimal credit, price volatility and liquid - ity risks. • In relation to yen-denominated Trust Benefi - ciary Interest Stablecoins, issuers would be permitted to invest in short-term Japanese Government Bonds (JGBs) with a maturity of three months, which are considered to carry the lowest price volatility and liquid - ity risks. Moreover, even if the maturity of JGBs is a period longer than three months, provided that the remaining maturity at the time of investment is three months or less, they would also be permitted as investment targets given that they can be considered as carrying low price-volatility risk. • When issuing foreign currency-denominated Trust Beneficiary Interest Stablecoins, in light of current needs, for the time being, issuers would be permitted to invest US dollar-denominated Trust Beneficiary Interest Stablecoins only in US Treasury bonds. In this case, as in the case of yen-denominated Trust Beneficiary Interest Stablecoins, US Treasury bonds with a maturity and remaining period of three months or less would be accepted. • Depending on the ratio of JGBs, the maxi - mum ratio of JGBs would be set at 50% to mitigate the high risk of not being able to redeem JGBs promptly and reliably in the event of simultaneous redemption requests due to credit concerns over electronic pay - ment instruments. • On the other hand, if the price of the under - lying asset (JGBs) falls due to market con - ditions, the issuer would be obligated to contribute an equivalent amount of additional trust funds to ensure prompt and full redemp - tion.

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