Japan Legalised Stablecoins and Locked Out Foreign Issuers in the Same Move

Two weeks ago, on 13 June, Japan's amended Payment Services Act took operational effect. The amendments expand VASP registration requirements, formalise the classification of stablecoins as electronic payment instruments, tighten travel-rule notification for cross-border transactions, and clarify the FSA's enforcement posture toward foreign platforms that solicit Japanese users.

Most English-language coverage framed this as Japan opening up. That reading is half right, and the missing half is the half that determines whether you can build a business here.

What the rules actually do

Under the amended PSA, only certain categories of licensed financial institution may issue electronic payment instruments that function as stablecoins redeemable at par for fiat. Yen-pegged and dollar-pegged stablecoins can only be sold to Japanese residents if issued by a bank, a trust company, or a licensed fund transfer service provider. Issuers must maintain reserves equal to 100% of outstanding value in segregated, highly liquid assets, and must implement disclosure and complaint-handling mechanisms.

And then the clause that matters most to anyone reading this from outside Japan: foreign stablecoin issuers without a Japanese-licensed distribution partner remain effectively locked out, regardless of the new rules.

Licensed distributors already operating here — SBI VC Trade, Rakuten Securities — hold first-mover advantage on foreign stablecoin distribution. Registered exchanges wishing to list EPI-classified stablecoins must verify issuer compliance and maintain their own custody controls.

The likely practical effect, as practitioners have noted, is a two-tier market.

The technology standpoint

The reserve and segregation requirements are not the hard part. Any serious issuer can hold 100% backing in liquid assets and publish attestations.

The genuinely demanding piece is custody architecture. Any fintech whose custody stack was not designed for client asset segregation to Payment Services Act standards is now operating in a clearly defined compliance gap rather than an ambiguous one — and clarity cuts both ways. The updated rules illuminate the compliant pathway, which makes non-compliant channels considerably more visible to regulators than they were.

There is also a practical architecture point for anyone building cross-border settlement. Fintechs serving Japanese clients need custody that handles both dollar and local-currency stablecoins, because the bridge between USD stablecoins and yen settlement is now a legally framed activity rather than a grey zone. That is an opportunity, but it requires building for two regimes at once.

The business standpoint

I want to be careful not to describe this as protectionism, because I do not think that is what it is.

The FSA's evident objective is a stablecoin market that does not blow up. Everything in the framework follows from that: full reserves, licensed issuers, defined custody standards, a supervisory office covering both payment services and stablecoins. A regulator optimising for stability will naturally route activity through entities it already supervises, and the practical consequence is that foreign issuers must enter through a domestic licensed party.

But the effect is what matters commercially, whatever the intent. And the effect is that Japan has converted a product question into a partnership question.

In a market without this structure, a stablecoin issuer competes on reserves, transparency, integrations and liquidity. In Japan, none of that reaches a customer until you have a licensed distribution partner. The best product in the world with no distribution partner has precisely zero addressable market here.

This is the same structural pattern I have watched play out repeatedly in Japanese enterprise technology, where roughly 70% of software revenue moves through partner channels rather than direct. What is unusual about stablecoins is that the partner requirement is not a market convention you could theoretically work around. It is written into the regulation.

The market standpoint — what this means if you're selling here

Your Japan strategy is your partner strategy. There is no separate product strategy. If you cannot name the licensed entity that will distribute you, you do not have a Japan plan. You have a Japan aspiration. I would put partner identification ahead of localisation, ahead of hiring, ahead of entity formation, because everything else is contingent on it.

Understand that the partner slots are finite and filling. SBI VC Trade holds the primary position for foreign stablecoin distribution today. Rakuten Securities is in the mix. This is not a long list, each of these firms can support a limited number of issuer relationships, and every month that passes is a month in which those slots get allocated to someone else.

Bring something the partner needs. A licensed distributor evaluating foreign issuers is choosing among applicants, and it will choose on what you add to their franchise — corridors they cannot currently serve, enterprise relationships they want, technology they would otherwise build. "We are the largest issuer globally" is not a reason for them to prefer you; it is a reason they might expect you to be difficult to work with.

Assume the two-tier market is permanent. Compliant, licensed, partner-distributed players in one tier. Everyone else outside, increasingly visible to a regulator that has now published exactly what compliance looks like. Choosing the second tier is not a growth strategy with regulatory risk attached; it is a decision not to be in the Japanese market.

Why I keep returning to this example

I use this case when people ask what is genuinely different about Japanese go-to-market, because it strips away the cultural explanations that usually dominate that conversation.

There is nothing about relationships or consensus or patience in the amended Payment Services Act. It is a technical regulatory instrument. And it produces the outcome that people usually attribute to Japanese business culture — that you cannot enter without a domestic partner — purely through structure.

Culture is real and it matters. But a great deal of what foreign companies experience as cultural friction in Japan is actually structural, and structure can be read, priced and planned for in a way that culture cannot. The companies that do well here are generally the ones that worked out which of the two they were dealing with.