[Interview] JPYC CEO: "The 1 Million Yen Remittance Regulation is Excessive... Easing Expected Next Spring"

JPYC, Japan's first yen-based stablecoin, celebrated its first anniversary of issuance on October 27.

Over the past year, the use of JPYC has significantly expanded.

Lawson has conducted POS payment trials, and it has been decided to introduce JPYC as a payment method at approximately 2,300 partner companies of the large logistics firm AZ-COM Maru. Partnerships with major companies such as Sony Bank and LINE NEXT have also been established.

Internationally, JPYC has been adopted as a partner currency for Circle's on-chain foreign exchange infrastructure, "StableFX," in the United States. JPYC has also been listed on South Korean virtual asset exchanges such as Upbit.

Noritaka Okabe, CEO of JPYC, stated on October 27, "The business development has progressed faster than expected," in an interview with NADA News. He noted that matters he thought would take years to resolve were announced within a year.

JPYC announced that its cumulative issuance exceeded 10 billion yen in September.

However, CEO Okabe explained, "The circulation of JPYC is not increasing well," adding that it remains at about one-fourth of the target set internally.

Below is a Q&A with CEO Okabe.

Q. It’s the first anniversary of issuance. Looking back on the past year?

"The business development has been faster than expected. We were able to announce various matters that we thought would take years within the first year. I honestly thought that the utilization overseas would be after the second year.

JPYC is issued on a public blockchain that anyone can use without permission. Therefore, it has been listed on overseas exchanges such as Upbit without us knowing. This has positively influenced discussions for collaboration with banks.

The ways of utilization have also exceeded expectations.

The first place to introduce gas-free payments (where users do not bear blockchain fees) was a quail egg vendor. Additionally, rice can now be traded by AI agents, and quantum computing fees can be paid as well."

Q. What are the indicators related to JPYC? The cumulative issuance has exceeded 10 billion yen, and the circulation currently exceeds 3 billion yen.

"Honestly, I think it is not increasing well. The trading volume itself is not bad.

Among stablecoins other than the dollar, the yen-based stablecoin ranks third or fourth after the euro. However, I am not satisfied with the scale.

What I have realized while actually doing business is the strictness of the 1 million yen remittance limit regulation.

Asteria has stated that it will hold 1 billion JPYC, but it is gradually increasing its balance by remitting in several installments. Without such determination, it is difficult for a company to hold more than 100 million JPYC.

Compared to the figures we set internally, it remains at about one-fourth. However, the entire stablecoin market, including the dollar, has been hovering around 300 billion dollars for about the past year.

I think this is because the high U.S. interest rates have created an atmosphere where it is better to hold government bonds than stablecoins. In such a situation, I believe we have managed to hold our ground to some extent."

Q. On September 17, JPYC trading support was implemented on Upbit, causing the price to deviate significantly from 1 yen. Can you explain the situation at that time?

"At that time, I was on a plane returning from the United States.

Before boarding, I saw the Upbit announcement and left a comment saying, 'JPYC does not spike,' before getting on the plane, but after landing, the situation had completely changed. The company received several months' worth of applications all at once, and many employees worked until 4 a.m. the next day to respond.

We were prepared for a downward price deviation. We had established a business continuity plan (BCP) in anticipation of a flood of redemptions.

However, it is generally hard to imagine a price deviation upwards. There are no other measures besides continuing to issue and redeem at 1 yen.

When taken to decentralized exchanges (DEX), it can be sold for 2 yen or 3 yen, so everyone rushed in saying, 'Please issue quickly.' Nevertheless, we could not relax the standards such as customer verification to prevent money laundering.

Since it was sudden, we could not increase personnel, so all employees worked long hours under the usual system to respond.

It is estimated that about 35 billion yen was traded in total, combining Upbit and the DEX Uniswap, and we managed to handle it without major incidents."

Q. The circulation once exceeded 4 billion yen but has returned to 3 billion yen.

"It's easy to understand if you compare it to a bank. If a regional bank with deposits of 20 trillion yen suddenly sees its deposits surge to 40 trillion yen in one day, only to drop to 33 trillion yen shortly thereafter, that bank would likely go bankrupt.

We were able to overcome the crisis because we had raised nearly 7 billion yen in the Series B stage.

It may have seemed excessively large, but it reinforced the importance of holding cash. Thanks to our ability to cope with this sudden fluctuation, we have gained more trust in the market."

Q. In October, it was announced that JPYC provided information to the Japan Fair Trade Commission to expand its utilization. What is the background?

"We have heard many voices saying that JPYC does not provide benefits to users.

While there are stores that offer discounts or free shipping when paying with JPYC, they are still few. A market survey revealed that many stores hesitate to offer discounts due to concerns about the terms of credit card or easy payment agreements.

What and how to discount is originally a matter that the trading parties should freely decide.

The Japan Fair Trade Commission previously issued a report suggesting that measures prohibiting cash payment discounts could be problematic under antitrust laws.

We judged that the same logic could apply to stablecoin payments and provided information. While I cannot disclose the specific content of the exchanges, I believe we were able to share a basic perspective."

Q. Is there a possibility that the 1 million yen remittance limit regulation, which is cited as a major cause of growth slowdown, will be eased?

"According to the Financial Services Agency's research committee materials, it is stated that they will 'examine and review' the stablecoin system.

In bureaucratic terms, this is interpreted as a gentle way of saying they will revise the system. It is clear that the matter is on the agenda.

However, since there is no concrete consensus yet, operators and industry groups need to actively propose solutions.

The next one or two months will be crucial. Policy discussions in Japan generally take place in the fall and are deliberated in the National Diet at the beginning of the year.

If discussions do not progress between October and December, it is likely to be delayed by a year.

The Payment Services Act is typically revised every two years, so if we clearly convey our opinions now, there is a possibility they will be reflected in next year's revision schedule."

Q. Is legal amendment essential?

"It is not necessarily so. The upper limit of 1 million yen is specified in the ordinance and ministerial regulations, so theoretically it can be changed at the discretion of the Financial Services Agency. I believe there is a possibility that new regulations could be implemented as early as next spring.

For example, there are options to ease the interpretation of what '1 million yen per transaction' means, such as clarifying the definition of 'per transaction' and where restrictions apply among issuance, secondary distribution, and redemption.

On October 21, the Minister of Land, Infrastructure, Transport and Tourism announced that they would consider utilizing stablecoins for tax exemption benefits for foreign tourists visiting Japan. This is a national issue at that level.

When the law was enacted in 2022, there was a significant intention to start with small-scale regulations due to the Libra controversy.

Currently, a global trend is forming to promote on-chain finance, and there is a consensus that digitization is essential to protect monetary sovereignty in Japan.

We plan to appeal that there is no reason to maintain unnecessarily excessive regulations. We are receiving somewhat positive responses."

Q. The same restrictions apply to overseas stablecoins.

"The 1 million yen limit also applies to overseas electronic payment methods such as USDC (USD Coin). I believe this measure was taken to prevent the influence of the dollar from rapidly expanding if USDC were to be used without limits, which would hinder the establishment of yen stablecoins.

However, conversely, if JPYC and USDC can only be exchanged in increments of 1 million yen, it also restricts the scalability of JPYC. I believe that unreasonably strict aspects can be gradually eased."

Q. Does this also affect JPYC transactions at digital asset exchanges in Japan?

"Yes. Even if domestic trading firms try to create a trading pair between JPYC and BTC (Bitcoin), the 1 million yen regulation is interpreted to apply in practice.

If that is the case, it becomes difficult for operators to make a profit. Regulatory easing or clear interpretations are needed.

Public support is a great strength in the discussions that will continue until the end of the year. I hope the media will actively cover this."

Q. What are your future goals?

"We aim to have JPYC handled more broadly across global exchanges.

I also hope that electronic payment service providers in Japan will adopt it. Currently, only two registered operators, SBI VC Trade and Coincheck, exist, but we are closely collaborating with each company through industry groups.

Whether it is implemented depends on each company's business plans. We will also expand the supported blockchain networks.

The circulation is currently in the tens of billions of yen, but we aim to raise it to at least hundreds of billions of yen. We believe it should grow about tenfold annually."

*This article was written by Naoki Tochiyama, a reporter for NADA News. and NADA News signed a content partnership agreement in February.

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