Japan’s key financial authority has expanded its framework to officially treat foreign trust‐issued stablecoins as electronic payment instruments instead of securities under domestic law.
Foreign Stablecoins Recognized As Payment Instruments
On Tuesday, Japan’s Financial Services Agency (FSA) announced amendments to the Cabinet Office Ordinance to recognize certain trust-type stablecoins issued by foreign trust banks and similar entities as “electronic payment instruments” under the Payment Services Act, local news reported.
The amendment, scheduled to take effect on June 1, 2026, will exclude qualified foreign trust beneficiary rights-based stablecoins from classification as “securities” under the Financial Instruments and Exchange Act (FIEA), allowing them to be handled by domestic operators registered as electronic payment instrument operators.
To achieve this, the Cabinet Office Ordinance established four requirements, including the legal status of stablecoin issuers, the management of underlying assets, measures to prevent criminal use, and currency denomination consistency.
Under the new rules, issuers must be registered or licensed under foreign laws deemed equivalent to Japan’s Payment Services Act or Banking Act and supervised by an authority that can share oversight information with the FSA commissioner upon request. The FSA will verify each issuer’s supervisory cooperation framework during its suitability review, the report noted.
Foreign stablecoin issuers must also manage reserve assets under applicable foreign laws and submit to audits by local professionals equivalent to certified public accountants or audit firms.
In addition, they must maintain systems to detect and respond to criminal misuse, including mechanisms to suspend transactions, and ensure the trust property and reserve assets are denominated in the same currency.
Notably, authorities will assess on a case-by-case basis whether a stablecoin can reliably be redeemed at its issue price to the same degree as Japanese electronic payment instruments. As a result, stablecoins used overseas may be treated differently in Japan depending on their reserve composition and audit arrangements.
Japan Expands Crypto Regulations
Over the past few years, Japanese authorities have been working to restructure the treatment of crypto assets in the country. The latest changes to the Cabinet Order Ordinance have expanded Japan’s legal framework for stablecoins, established through the 2022 amendment to the Payment Services Act.
The government recently amended the FIEA to classify crypto assets as financial instruments and backed a tax reform plan to introduce a separate system for different transactions and a flat 20% tax on crypto income.
Last month, the FSA, alongside the Ministry of Land, Infrastructure, Transport and Tourism, the National Police Agency, and the Ministry of Finance, issued joint guidance outlining compliance requirements for the use of crypto in real estate deals.
As reported by Bitcoinist, the regulators requested that real estate firms conducting crypto transactions strictly enforce Know Your Customer (KYC) procedures and source-of-funds verifications.
The joint guidance outlined reporting obligations for cross-border payments, unlicensed transactions, or suspicious fund flows. Additionally, it warned firms that activities involving the exchange of crypto assets for fiat currency or brokerage services on behalf of clients may constitute crypto asset exchange operations, which carry the risk of legal violations.
The total crypto market capitalization is at $2.52 trillion in the one-week chart. Source: TOTAL on TradingView
