JPYC CEO Noritaka Okabe on the Uses of a Japanese Yen Stablecoin and How to Engage with Regulators

The interviewer first suggested that the biggest impact of obtaining the license might be that overseas stablecoins such as USDC could now be handled in Japan. Okabe reframed this premise. With SBI VC Trade having obtained an exchange license in Japan, users in Japan had already been able to buy USDC since March of this year. What had been missing until then was a stablecoin denominated in Japanese yen, and no one had yet been granted a license to issue one. JPYC became the first company to obtain that issuance license.

Okabe recalls that while stablecoins were expanding rapidly around the world, there was no Japanese yen stablecoin, and almost nothing that could be called a "digital yen" in the broad sense. This time, the company obtained its license not under the conventional prepaid payment instrument framework but as an issuer of electronic payment instruments. This means that yen can be exchanged for JPYC, and JPYC redeemed back into yen, at any time. Okabe described this as a state in which a digital yen "in the true sense" has been issued in Japan, and said it is expected to greatly accelerate the AI economy and economies built on blockchain.

On the exchange and intermediation of overseas stablecoins, Okabe explained the distinction between licenses. What JPYC currently holds, and is actually using to issue and redeem, is a license to issue and redeem the Japanese yen stablecoin JPYC. Exchanging it for overseas coins requires a separate license. Alternatively, that is something users do themselves through decentralized finance, so it is a separate matter from the company's license. Even so, with a stablecoin built to a global standard now issued in Japan, users can freely access new forms of finance on their own. Okabe considers this a major difference.

Competing initiatives have also emerged, such as Progmat, which is affiliated with trust banks. Asked about the company's strength as a startup against them, Okabe pointed to "whether or not you are the issuer." JPYC is on friendly terms with Progmat, but Progmat is not an issuer in the usual sense. JPYC obtained an issuer license itself and handles issuance and redemption in-house. The difference, Okabe says, is that JPYC operates the specialized business known as funds transfer itself, as a financial institution.

According to Okabe, there may be several companies capable of building the system. But obtaining a difficult FSA license and actually issuing and redeeming coins for users is a different level of difficulty altogether. Okabe's view is that the company is the only one in Japan able to do something other financial institutions have not yet managed to do.

In response to the interviewer's sense that Japanese banks are slow to move, Okabe explained the banks' circumstances. All of the major banks had been focusing on stablecoins and considering them seriously. However, with interest rates low in Japan, banks probably judged that it was not necessarily a profitable business, Okabe surmises.

JPYC itself had been preparing since the era of zero interest rates. Okabe says the company had thought things might be tough unless rates rose. Okabe gives two reasons why the company was nonetheless able to keep going. One is that, as a startup, it doesn't spend money wastefully. The other is that while the fee income banks currently earn could shrink as stablecoins spread, JPYC has no such core business. It was precisely because it had no core business that it could take on the challenge, Okabe says. Large organizations tend to fall into the innovator's dilemma, and this time the company leveraged its strengths as a startup to aim for the first license. Okabe believes the reason JPYC was the only one to obtain it is that the company tackled it more seriously than anyone and also had expertise in blockchain.

The relationship with Circle, the issuer of USDC, was described starting with the history of its investment. Circle invested in JPYC in 2021, four years ago, and JPYC is said to be known as the first startup in the world to receive investment from Circle. In Okabe's view, Circle's aim was as follows. Circle issues USDC in dollars and EURC in euros. If a stablecoin built to the same standard were also available in Japan, it would effectively become the de facto standard, unifying the standard for stablecoins worldwide. Okabe said that JPYC did in fact issue Japanese yen to the same standard as Circle and was able to become the de facto standard.

As a concrete example of what lies ahead, Okabe cited Arc, a layer-1 blockchain announced by Circle. It is a new, stablecoin-centric blockchain designed to let institutional investors handle stablecoins. On top of it is a concept called "StableFX," in which institutional investors conduct FX on the blockchain, and it is scheduled to launch next year. JPYC will play the role of the Japanese yen there. Circle already issues dollars and euros, and the plan is to form partnerships with stablecoins from various countries, such as the Philippine peso, Brazil, and South Africa, so that they can be exchanged with one another.

According to Okabe, until now, even when foreign exchange FX was conducted, settlement took one or two days. With this system, simultaneous settlement in nearly zero seconds will become possible, and Okabe expects both capital efficiency and funding efficiency to improve significantly. The company is reportedly working with Circle on several such new services behind the scenes.

The interviewer, assuming that usage would center on business-to-business transactions, asked specifically which industries and companies want this system. While acknowledging the size of B2B transactions, Okabe raised problems that apply to individuals and companies alike. When moving money for investment and other purposes, foreign exchange fees are high and transfers take time. With stablecoins, fees can be lowered to 1–5 basis points, money can be sent almost simultaneously, and there is no need to go to a financial institution each time. This is said to be a point of very high expectations.

Another problem Okabe raised is automation. Finance is the one area where things still don't move forward unless a person presses a button or stamps a hanko seal, and this is holding back automation and DX. Because stablecoins are programmable money, payments and transfers can be made by programs without human intervention. Okabe positions this as an important step toward DX and an AI-driven society.

As for use cases, Okabe explained that stablecoins are already being used for trade settlement, and in the asset management world they have come to be used quite a lot for purposes such as moving between dollars and yen to balance portfolios. Going forward, applications are also expected in areas such as AI agents making payments on behalf of humans.

Until now, JPYC had been in a phase where fundraising came first. Asked where it will generate revenue after registration, Okabe stated plainly that it is not a fee model. The source of revenue is not charging users fees but the interest on backing assets such as government bonds. Okabe describes it as a business model close to that of the Bank of Japan or an insurance company.

The picture Okabe presented is as follows. If 1 trillion yen is issued, roughly 1.01 trillion yen is deposited as backing. At 1%, that comes to 10.1 billion yen, which becomes gross profit. Not being a fee business is a major feature of the company and a major difference from before, Okabe says.

How will the company differentiate between its existing prepaid payment instrument and the new stablecoin? Okabe's answer was not differentiation but consolidation. Under the 2022 legal amendment, prepaid instruments that qualify as electronic payment instruments can no longer be newly issued. Conventional prepaid instruments such as paper ones can still be issued, but they are treated differently. For this reason, Okabe expects things to be consolidated into JPYC as the newly approved electronic payment instrument.

The difference lies in whether it can be redeemed for yen. Okabe sees JPYC as an electronic payment instrument, which can be redeemed, as far more convenient than a prepaid instrument that cannot. Because the prepaid "JPYC Prepaid" cannot be newly issued, its balance will gradually decline. Meanwhile, newly issued JPYC has already roughly doubled in one month, and it is the new JPYC that will grow from here, Okabe says.

The company started from the entry point of prepaid instruments and went on to obtain a financial license, and it did so without fighting with regulators. Asked for the secret to that dialogue, Okabe cited two ways of thinking. One is staying true to the basics: if it's written in the law, believe you can do it and do it. The other is the idea that regulations can be changed. If there is a rational reason, regulations should be changed. Okabe thinks that many companies have traditionally regarded regulations as something handed down from above that cannot be changed. In contrast, when bringing new technology into society, the company takes the approach of changing the regulations themselves while adapting to the new regulations in order to break through, in pursuit of its mission of "breaking through society's dilemmas."

On top of that, Okabe emphasized "going in through the front." Surprisingly, people don't knock on the front door, Okabe says. A common pattern is to think things through desperately, then put the idea forward, and give up if it's rejected. The company first goes and knocks on the front door, and if told no, asks why, addresses those reasons, and brings it back again. Repeating this endlessly is its basic approach and something it excels at. Where most would give up after being told no once or twice, not giving up is probably the strength of a startup, Okabe said.

As a concrete episode, Okabe revealed that in the early days, Okabe did nothing but call the FSA over and over. A considerable share of the inquiries reportedly came from Okabe. Okabe made the calls personally. A lawyer could have done it on the company's behalf, but speaking directly quite often made the nuances clear.

The Web3 world is full of speculative talk. Asked why the company has nonetheless focused on payments and practical use, Okabe cited experience from a previous job. There, Okabe had been involved in issuing and distributing crypto assets for free, but large companies would not accept crypto assets whose prices fluctuated. Feeling the need for stablecoins at that point was the first reason.

The second is taxation. Crypto asset taxation in Japan is very strict; for example, if a company holds them, they are marked to market at the end of the fiscal year, and tax is levied even though nothing has been sold yet. Frankly speaking, Okabe had thought it would be very difficult to run a crypto asset business in Japan. Within that context, the one thing Okabe thought might be feasible was a stablecoin whose price does not fluctuate. For better or worse, since it doesn't go up or down, you don't get taxed out of nowhere. Okabe explains choosing this field because it seemed like something that could be done.

Asked what had been the hardest part, Okabe first replied that this company is Okabe's third, and that things have gone relatively smoothly. Having started with capital of 1 million yen and come this far in six years, perhaps there were no great hardships. Even so, there were several moments when the company looked likely to be crushed.

The most dangerous period Okabe cites is the time of the legal amendment. In 2021 the Financial System Council issued a report, and in 2022 the bill passed the Diet. Around that time, banks and others voiced the opinion that only banks should be allowed to issue stablecoins. In response, JPYC asked for tiered regulation that would allow even startups to step up gradually, and for consideration of startups since they are the ones who drive innovation.

Looking back, Okabe says that if this had not gone through, there would have been no path forward. The company might now be one that builds banks' stablecoins behind the scenes. The path of obtaining a license and issuing on its own would have been closed off, and in some cases it might have been acquired cheaply in an M&A deal. In the end, the framework allowed even startups to issue if they cleared the strict standards set by the FSA, and the company survived by a hair's breadth. The road from there to obtaining the license was also a difficult one. Still, whether or not you can see a path showing that clearing the bar will get you this far makes a huge difference in whether there is hope, Okabe said.

Asked whether there was ever a moment when Okabe nearly lost heart, Okabe answered that when there are difficulties or challenges, you try to overcome them somehow, and being able to enjoy it to some extent is probably a common trait among startup executives. However, there were several moments when external factors made it feel like things had been "pushed back." For example, when a crypto asset exchange suffered a leak incident, Okabe thought that had set things back a year.

Turning to the future, the interviewer brought up the lifting of the ban on digital salary payments, asking whether a time will come when company employees receive part of their salary in USDC or the like and invest it directly. Okabe believes companies paying salaries in JPYC will also emerge. The company has received investment from the CVC of Persol, a human resources company, and envisions stablecoins being used for salary payments, compensation for freelancers, and the like. According to Okabe, the company is also in talks with the Ministry of Health, Labour and Welfare, and salary payment by stablecoin is permitted under certain conditions. Okabe expects that some companies, such as those with many foreign employees, will pay salaries in JPYC.

Finally, Okabe was asked for a message to companies and executives considering adopting stablecoins. Okabe noted that the stablecoin market is worth 49 trillion yen globally, and that there are forecasts it will grow roughly tenfold from there. If Japanese yen stablecoins fail to spread in that context, Okabe believes it would truly harm the national interest. Just as there are almost no Japanese companies that don't use AI, Okabe expects there will be almost no companies that don't use stablecoins. Since JPYC has already reached the point where anyone can access and use it, Okabe urged listeners to keep their antennas up now so as not to miss this wave, bringing the interview to a close.