Japan’s financial authorities are planning changes to make yen-based stablecoins easier to use for payments and other transactions.
Japan’s Financial Services Agency (FSA) has proposed a tax filing exemption for trust-type stablecoins as part of Japan’s fiscal 2027 tax reform plan. Once approved, the changes are expected to take effect on April 1, 2027.
The proposal focuses on problems with the current rules for trust-type stablecoins. Under Japan’s current rules, trustees are generally required to report changes in trust beneficiaries.
However, stablecoins are designed to move between users as payment and settlement instruments. This means that the beneficiary can change whenever a stablecoin is transferred. Because of this, trustees may have difficulty tracking every change in ownership.
Filing a report for every change can also create a large administrative burden. The Japanese FSA believes that the existing reporting requirements do not fit how trust-type stablecoins are used in practice.
Trust-type stablecoins are also different from assets that are mainly held as investments. They are designed to function as digital payment instruments and can move frequently between users. Because of their frequent movement, applying the same reporting requirements used for traditional trust assets can add more administrative work.
The proposal aims to remove the specific filing requirements related to changes in beneficiaries for trust-type stablecoins. However, this does not mean that all stablecoin transactions in Japan will become tax-free. The proposal is focused on the tax filing obligations connected to changes in beneficiaries.
Different Stablecoin Models and the ¥1 Million Limit
Japan allows regulated stablecoins to be issued under different models, including the fund transfer service provider model and the trust company model.
Under the fund transfer model, certain stablecoins are subject to a ¥1 million limit per transaction. JPYC, issued by JPYC Inc., is an example of a stablecoin using this model.
On the other hand, trust-type stablecoins are not subject to the same ¥1 million transfer limit. Under this model, a trust company or trust bank manages the assets backing the stablecoin, such as yen, while issuing stablecoins that represent rights connected to those assets.
One example is JPYSC, issued by SBI Shinsei Trust Bank, which uses the trust-type model. Because of its structure, JPYSC does not have the same ¥1 million transaction limit that applies to fund-transfer-type stablecoins. This allows trust-type stablecoins to support larger-value transactions and settlements.
The difference between these two models is important because the regulatory structure can affect how stablecoins can be used. Fund-transfer-type stablecoins such as JPYC have faced the ¥1 million limit, while trust-type stablecoins such as JPYSC do not have the same limit.
Supporting the Use of Yen-Based Stablecoins
The FSA’s proposal also seeks to provide similar tax filing relief for eligible trust-type stablecoins issued overseas, even if the issuer is not based in Japan. This could allow the same reporting treatment to apply to qualifying foreign-issued trust-type stablecoins.
The proposed changes are part of Japan’s effort to support the use of stablecoins as digital payment and settlement instruments. Reducing unnecessary reporting requirements could make it easier for trust-type stablecoins to circulate between users, while the different stablecoin models can support different types of transactions.
For example, fund-transfer-type stablecoins can be used for payments within their applicable limits, while trust-type stablecoins can support larger transactions without the same ¥1 million restriction. This could make stablecoins more useful for both everyday payments and higher-value transactions.
However, the proposal still needs to go through Japan’s tax reform process and receive approval from the government and lawmakers.
If approved, the reforms could reduce the administrative burden connected to trust-type stablecoins and support the development of Japan’s yen-based digital payment system.
