Japan's Banks Prepare to Invest in Bitcoin

Japan's Financial Transformation and Bitcoin Investments

Japan is undergoing a profound digital transformation in its financial structure. The country's Financial Services Agency (FSA) is considering significant regulatory reforms that would allow local banks to invest in and hold crypto assets such as Bitcoin, which are not officially supported.

The Place of Bitcoin in Bank Balance Sheets

These new regulations indicate a significant shift in Japan's approach to cryptocurrencies. Previously, updated audit guidelines from 2020 prevented banks from purchasing crypto assets due to concerns about excessive volatility. However, the recent maturation of the crypto market in Japan has led to a reassessment of these restrictions. According to data, as of 2023, the number of crypto accounts opened in Japan has exceeded 12 million, showing a 3.5-fold increase over the past five years.

Stablecoin Initiatives and Collaborations

In order to support digital asset investments, Japanese banks are working on innovative projects such as stablecoins pegged to the yen. The country’s three largest banks — Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), and Mizuho Financial Group — are collaborating to launch stablecoins for corporate use. Initially, they announced they would focus on a coin pegged to the yen; in the future, developing a coin pegged to the US dollar is planned.

Legal Framework and Financial Infrastructure

These developments aim to take advantage of the legal framework offered by the 2023 Payment Services Act. Banks are looking to enhance interoperability among their corporate clients by utilizing a new system developed by the fintech company Progmat. Initially, Mitsubishi is expected to use these stablecoins for corporate payments, with plans for the system to be implemented in the real world within this year.