Introduction: The "Bifurcation" Pattern of Stablecoins in Japan

Japan's stablecoin market is exhibiting a "dual-track" or "bifurcated" development pattern. This pattern is not a random market evolution but rather the result of Japan's unique regulatory framework, deep-seated industrial demands, and distinctly different technological implementation paths, all of which contribute to a "top-level design."

The first track is a bottom-up development path, typified by JPYC. This track operates within the legal "fence" and primarily serves the global, permissionless DeFi ecosystem.

The second track is a top-down path led by traditional financial giants. Its core representative is the stablecoin framework recently announced by Japan's three major banks (Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho), which will be jointly promoted and unified under the Progmat platform. The goal of this track is to serve the regulated, institutional-level corporate settlement and security token (ST) market.

This article will objectively and deeply deconstruct these two tracks, focusing on their first pillar: Legal Foundation and Technical Architecture. We will explore in detail: how the legal frameworks they each rely on fundamentally determine their market positioning? What "pain points" have they technically addressed that traditional finance could not? Especially, what are the true strategic intentions and technical considerations behind the institutional alliance of the three major banks?

Through a parallel analysis of these two tracks, we will reveal a national-level strategy of partitioned management and parallel development in Japan's crypto industry.

1. Deconstructing the Dual Track — Legal Foundation and Technical Architecture

Track One: The Legal Evolution of JPYC and the "1 Million Yen Wall"

To understand JPYC's market positioning and technical use case, we must first comprehend its fundamental legal status evolution that occurred in 2025.

• From "Prepaid Instrument" to "Funds Transfer Instrument" Compliance Upgrade

In the early exploratory phase, JPYC's operating entity, JPYC Inc., adopted a flexible legal framework — "prepaid payment instrument." Under this framework, JPYC was legally closer to a "game point" or "mall gift card," with the core feature being non-redeemable for yen.

This was a clever strategy during a regulatory vacuum period. It successfully circumvented the strict regulations of complex banking and funds transfer legislation, allowing JPYC to function as a "yen-denominated point."

However, this "gray" phase has ended. With the revision of Japan's Funds Settlement Act in 2023, stablecoins were officially defined as "electronic payment instruments," necessitating an upgrade of JPYC's legal foundation.

JPYC's prepaid model ceased issuance in June 2025. Instead, JPYC Co., Ltd. officially obtained a "Type 2 Funds Transfer Business" license after a lengthy application process.

This "compliance upgrade" is significant. It fundamentally transformed JPYC's legal status: from a non-redeemable "point" to a regulated, compliant, legally redeemable for yen "funds transfer instrument." This legally established it as a true "stablecoin."

• The "1 Million Yen Wall": Market Ceiling Defined by Legal Framework

However, this compliance upgrade, while granting it "redeemability," also imposed a core "shackle" that determines its market positioning — the "1 million yen transaction limit."

According to the framework of Japan's Funds Settlement Act, the core feature of a "Type 2 Funds Transfer Business" license is to promote innovation while strictly preventing money laundering and protecting consumers. To this end, regulations stipulate that single transactions must not exceed 1 million yen.

This is the core limitation commonly referred to in Japan's financial and crypto sectors as the "1 million yen wall."

This legal restriction fundamentally determines JPYC's market positioning. It indicates that JPYC cannot be used for large-scale transactions exceeding 1 million yen on a legal level. This effectively isolates it from large inter-institutional settlements, B2B cross-border settlements, and the (which we will detail later) security token market.

Therefore, JPYC's technical architecture and core use cases must unfold under the premises of "redeemability" and "1 million yen limit." Its technical architecture is inherently oriented towards public chains. It must be deployed on global public blockchains like Ethereum, Polygon, and Solana to serve its core DeFi market. Its smart contract design must be permissionless to freely integrate with global DEXs, lending protocols, and yield aggregators.

At the same time, this open technical architecture is constrained by the legal limits of its "Type 2" license. This creates a unique dual state: JPYC is technically global, permissionless, and unlimited (the smart contract itself does not restrict transfer amounts); but legally (when used by regulated Japanese entities or individuals), it is restricted and has limits. This "dislocation" between law and technology makes it inherently a tool for serving the "gray area" and pure Web3 economy, rather than becoming a settlement layer for mainstream finance in Japan.

Track Two: The Three Major Banks and the "Unlimited" Institutional Alliance of Progmat

Now, we turn to Track Two. This is a distinctly different narrative, not driven from the bottom up by Web3 native forces, but constructed from the top down by Japan's financial "top-level design."

• A New Legal Foundation Based on "Trust Law"

The legal foundation of Track Two completely bypasses the "funds transfer business" framework that JPYC belongs to. It is based on the legal path of "trust-type stablecoins" tailored for banks and trust institutions in the 2023 revision of the Funds Settlement Act.

Recently, the joint announcement by Japan's three major banks (Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho) is based on this new legal framework. Its core legal structure is:

1. Issuance Structure: The three major banks will act as "joint trust trustees," while Mitsubishi UFJ Trust Bank will serve as the "single trust trustee."
2. Core Feature: This is the most critical legal difference. "Electronic payment instruments" issued based on banking or trust licenses do not have a 1 million yen transaction limit.

This difference in legal status is a direct reflection of Japan's regulatory agencies' "top-level design." Japan is a "code-based law" country, where the behavioral logic of market participants (especially large financial institutions) is that "the gray area is prohibited." This is in stark contrast to the U.S. "case law" approach, where the gray area is permissible.

Thus, before the new law was enacted in 2023, Japan's institutional-level stablecoin market was nonexistent. The passage of the new law did not "regulate" an existing market but "created" a brand new, compliant market that institutions could enter.

• Progmat Platform: Deconstructing the Technical Architecture of the "National Team" of Digital Assets

Participants in Track Two chose a unified technical base — Progmat platform. To understand its technical architecture, one must first grasp its shareholder composition.

Progmat was spun off from Mitsubishi UFJ Trust Bank in 2023, becoming an independent company. Its shareholder lineup encompasses the core forces of Japan's finance and technology, making it a "national team" for digital assets:

1. Trust Banks (Issuance Layer): Mitsubishi UFJ Trust (42%), Mizuho Trust (6.5%), Sumitomo Mitsui Trust (6.5%), Norinchukin Trust (6.5%).
2. Exchanges (Circulation Layer): JPX (Japan Exchange Group, 4.3%).
3. Brokerage Firms (Sales Layer): SBI PTS Holdings (4.3%).
4. Technology (Infrastructure Layer): NTT Data (11.7%), Datachain (4.3%).

Thus, Progmat is not a technology startup seeking disruptive innovation. It is an "infrastructure alliance" jointly funded by Japan's core financial institutions, with the strategic goal of becoming Japan's unified, neutral, compliant "national-level infrastructure" in the digital asset era (ST, SC, UT).

In Progmat's technical blueprint, ST (security tokens), UT (utility tokens), and SC (stablecoins) are its three core pillars. ST represents tokenized "assets" (such as real estate), while SC is the "cash" used to pay for and settle these assets. The issuance of stablecoins by the three major banks is the final and most critical piece of the "payment and settlement puzzle" in Progmat's grand vision for the "ST (RWA) market."

• The Driving Force Behind Bank Stablecoins: A Technical "Bypass" of the "Core Banking System"

A core question arises: why would banks, which already have a mature and efficient internal payment system, go through the trouble of building a stablecoin platform on the blockchain?

The answer is that bank stablecoins are not meant to replace existing systems but to address three core "pain points" that the current system cannot solve, the most critical being the rigidity of their own IT architecture.

1. Interoperability:
2. Existing electronic currencies (such as PayPay, LINE Pay, etc.) are two independent, closed "private databases" operated by different companies. They have "no interoperability" and are "limited in scope." In contrast, blockchain-based stablecoins (SC) can achieve "mutual exchange" and are "accessible to anyone, anywhere."
3. Cross-Border Payments:
4. Traditional "bank remittances" require a lengthy chain composed of "intermediary banks." This process incurs "high intermediary costs and significant delays." The stablecoin system operates on a P2P model, transferring directly from one address to another, allowing for "minimal intermediary costs and instant transfers."
5. Rigidity of Core Systems:
6. This is key to explaining why banks "must" adopt "trust-type" stablecoins rather than simply opening their own bank accounts (i.e., "deposit tokens").

• Current Situation: Both Japan and the global banking IT systems rely on a closed, outdated yet extremely stable system known as the "core banking accounting system."
• Problem: This is a "large, cumbersome, outdated" system. Its key flaw is that it "does not support APIs for 'writing' or 'transferring' operations." All updates (such as transfers) must be initiated through the internal online banking system.
• Dilemma: To directly implement 24/7 external programmable calls on the "core banking accounting system," it would require "massive overhauls, which are unavoidable." This is almost unacceptable for any bank in terms of IT costs and financial stability risks.

The "trust-type" architecture provides a perfect "bypass" solution:

1. Bank Side: The bank (as the trustee) transfers funds into the "trust" (as the trustee). This is a standard, mature financial operation that occurs daily. The bank's "core banking accounting system" does not require any new development.
2. Trust Side: The trust (empowered by the Progmat platform) issues an equivalent amount of stablecoins on the blockchain.
3. On-chain: From now on, all 24/7 programmable smart contract calls and B2B automatic settlements occur entirely at the trust and blockchain level, completely isolated from the bank's "core banking accounting system."
4. Redemption: When users need to redeem, the trust destroys the stablecoins on-chain and returns the fiat currency to the bank's account through traditional channels.

This architecture, while completely avoiding any disruption to the bank's core accounting system, endows the bank's deposits (yen) with 24/7, low-cost, cross-border, and most importantly — "programmability."

2. "DeFi" and "Institutional" Market Positioning

We see that JPYC is defined by the "Type 2 Funds Transfer Business" license and the "1 million yen transaction limit," while Track Two (the Progmat alliance) is based on a "trust-type" license, constructing an institutional-level settlement network with "no transaction limits."

They are key to defining the market, segmenting customers, and addressing specific pain points. In this chapter, we will analyze in depth which core user urgent needs each of these tracks meets and what specific "pain points" they address in traditional finance and the Web3 economy.

JPYC: "On-chain Yen" Serving Global DeFi

The core user group of JPYC: global, permissionless participants in the crypto-native economy with transaction amounts below 1 million yen.

The core pain point that JPYC addresses is the absence of "on-chain yen," a key asset in the global DeFi ecosystem.

Pain Point One: DEX Liquidity and 24/7 Yen Forex Market

In global decentralized exchanges (DEX), USDC, USDT, ETH, and WBTC form the cornerstone of liquidity. However, the yen, as one of the major reserve and trading currencies globally, has long been absent.

The emergence of JPYC is the first compliant, redeemable on-chain yen solution. One of its core use cases is to serve as the liquidity base for JPYC/USDC or JPYC/ETH trading pairs. This effectively creates an efficient yen spot forex market, allowing any DeFi user globally to exchange yen for mainstream crypto assets at any time. Its core users are global DeFi traders, arbitrageurs, and Web3 protocols needing yen exposure.

Pain Point Two: Arbitrage Tool for "Tokenizing" Japan's Macroeconomic Environment

The most core and unique use case of JPYC in the financial realm is its successful "tokenization" of Japan's unique macro-financial environment — long-term low-interest rate policy — and its introduction into DeFi.

In traditional finance, this has given rise to the globally renowned "Yen Carry Trade": institutional investors borrow yen at extremely low costs (almost zero), convert it into high-yielding dollars, and invest in high-interest assets (such as U.S. Treasury bonds), thereby capturing the significant spread between the two.

However, this operation has traditionally been the domain of institutions, making it difficult for ordinary investors to participate. The pain point that JPYC addresses is the "decentralization and permissionlessness" of this professional-level financial strategy.

Within the legal framework of the "1 million yen limit," JPYC becomes the perfect tool for DeFi players to execute such arbitrage operations. A typical "on-chain yen carry trade" path is as follows:

1. Collateral: A DeFi user deposits their ETH or WBTC into decentralized lending protocols like Aave or Compound as collateral.
2. Borrowing: The user chooses to borrow JPYC. Due to the zero-interest rate environment anchored to fiat currency, the borrowing rate (Borrow APY) for JPYC on-chain is extremely low, far below that of other mainstream assets.
3. Exchange: The user immediately sells the borrowed JPYC on a DEX (like Curve or Uniswap) for high-yielding dollar stablecoins (like USDC or USDT).
4. Deposit for Yield: The user then deposits the exchanged USDC into the lending protocol's deposit pool or yield aggregator (like Yearn Finance), earning significantly higher deposit interest (Supply APY) than the borrowing cost of JPYC, thus capturing the spread between the two.

This action of "borrowing JPYC and exchanging for USDC" is itself a form of on-chain shorting priced in yen. The redeemability of JPYC, its compatibility with public chains, and the 1 million yen limit make it suitable for global DeFi traders to execute such medium-low amount, high-frequency arbitrage.

Pain Point Three: Yen Micropayments in the Web3 Ecosystem

Additionally, JPYC also serves Japan's local Web3 ecosystem. For developers in the NFT market, on-chain games, or Web3 applications, they need a native yen payment tool for small settlements. JPYC perfectly meets this demand for "micropayments" and "in-ecosystem settlements."

Progmat: "B2B Institutional Settlement Tool" Serving TradFi

In contrast to JPYC, the core users of Track Two's Progmat alliance are not global DeFi traders, but rather large enterprises, institutional investors, securities firms, and banks in Japan and globally.

The aim is to address systemic "pain points" in Japan's mainstream financial system that JPYC cannot reach.

Pain Point One (External): B2B Cross-Border and Corporate Fund Settlements (SWIFT Pain Point)

The pain points of traditional B2B cross-border payments are global. A bank remittance through the SWIFT system requires navigating a complex chain composed of "intermediary banks." This process incurs not only high intermediary costs (fees, exchange rate differences) but also suffers from poor timeliness (T+N arrival) and the limitation of not operating 24/7.

For global general trading companies like Mitsubishi Corporation, there is a massive daily demand for fund settlements worldwide. The stablecoins based on the Progmat platform provided by the three major banks offer the first compliant, unlimited, P2P alternative. It allows enterprises to make instant transfers from one address to another, minimizing intermediary costs. Its core users are the finance departments of multinational companies.

Pain Point Two (Internal): Modernization of Bank Core Systems

The second core user pain point addressed by "trust-type" stablecoins is the pain point of the banks themselves.

The brilliance of the "bypass" architecture (Bank ➡️ Trust ➡️ Blockchain) lies in its ability to endow the bank's deposits (yen) with "programmability" without touching the bank's core accounting system. This is a low-cost, low-risk, high-efficiency modernization solution for banking systems.

Pain Point Three: "Delivery versus Payment" (DVP Pain Point) in the Security Token Market

If B2B settlements are its direct application, then the ultimate goal of Progmat stablecoins is to provide a "cash pillar" for another major pillar of its ecosystem — security tokens.

The cornerstone of financial market settlements is DVP (Delivery versus Payment).

• Traditional Settlement: In a T+2 settlement cycle, there exists a significant "credit risk" and "time lag" between the buyer and seller.
• On-chain DVP: The buyer holds "money" (i.e., Progmat stablecoins), and the seller holds "assets" (i.e., Progmat security tokens). Through smart contracts, both parties can achieve "simultaneous exchange" (atomic swap).

This is based on an already existing large market. According to Progmat's data, as of autumn 2025, the cumulative issuance of domestic ST cases in Japan has reached over 280 billion yen, while the total outstanding balance of ST cases is as high as over 560 billion yen (approximately 3.8 billion USD).

Among these issued STs, by amount, over 86% are real estate STs.

This market for security tokens and RWAs, valued in the hundreds of billions of yen and growing rapidly, currently lacks a compliant, efficient, native "on-chain cash settlement tool."

Therefore, the "unlimited" stablecoins jointly issued by the three major banks have their core strategic users in this hundreds of billions-level ST/RWA market. Their goal is to become the only compliant, institutional-level DVP settlement tool in this emerging capital market, thus completing the final loop of "asset issuance" and "fund settlement" on the Progmat platform.

3. The True Strategic Intent of the Three Major Banks

Addressing the "pain points" is merely a surface-level "tactical goal." The deeper questions we need to answer are:

1. Why an "Alliance"? Why would the three giants, Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho, who are each other's biggest competitors in traditional finance, choose to "unite" in this core track?
2. Why "Progmat"? Why do the banks not build their own private platforms but instead choose to entrust this core infrastructure of future finance to a "neutral" entity that has been spun off from Mitsubishi UFJ Trust Bank with dispersed equity?

Answers to these two questions will reveal the true and ultimate strategic intent behind Japan's financial top-level design.

Intent One: "Neutral Platform" — The Only Path to Build the Industry's "Greatest Common Divisor"

The alliance of Japan's three major banks is the most thought-provoking strategic decision within the entire Progmat stablecoin framework. In the traditional financial world, payment and settlement are the most core and fiercely competitive territories for banks. Any bank (for example, Mitsubishi UFJ) attempting to build a private, exclusive stablecoin settlement platform and requiring its competitors (like Mizuho and Sumitomo Mitsui) to join and use it would be commercially impossible.

No financial giant is willing to run its future core settlement business on infrastructure controlled by its main competitors.

Thus, the three major banks recognize that to build a national-level "institutional settlement network" that can be adopted by the entire industry, the prerequisite must be "neutrality."

This is precisely the core reason why the Progmat platform has taken the historical stage. The design of Progmat's equity structure perfectly embodies this strategic consideration of "neutrality." It became an independent entity in 2023, having spun off from Mitsubishi UFJ Trust Bank, which, while still the largest shareholder (42%), has deliberately diluted its control.

More critically, Mizuho Trust, Sumitomo Mitsui Trust, SMBC, and even Norinchukin Trust all hold a 6.5% stake, making them core shareholders. At the same time, the alliance has also brought in representatives of "circulation" such as JPX (Japan Exchange Group), representatives of "sales" like SBI, and representatives of "technology" such as NTT Data.

This "all-star" equity structure aims to send a clear signal to the market: Progmat is not Mitsubishi UFJ's "private property," but rather an "industry public infrastructure" jointly funded and recognized by the core forces of Japanese finance.

By sacrificing the absolute control of a single institution, Mitsubishi UFJ has gained something far more valuable than control — the adoption and consensus of the entire industry. This is the "price" that must be paid to build a unified "national team" infrastructure and the only path to its success.

Intent Two: Defense and Counterattack — Building a "TradFi Compliance Moat"

The joint action of the three major banks is not only an offensive to "build a new continent" but also a crucial "defensive counterattack." The target of their defense is the global, permissionless cryptocurrencies (such as USDC and USDT) and emerging forces like JPYC.

From the perspective of traditional financial giants, if these "non-sovereign" and "non-bank" issued stablecoins are allowed to penetrate the B2B payment and securities settlement fields, the consequences would be catastrophic: the core settlement business of banks would be completely "disintermediated."

Therefore, the three major banks must take proactive action before the Web3 forces gain an overwhelming advantage. Their strategic logic follows the classic "embrace, expand, and incorporate":

1. Embrace: Actively embrace blockchain technology, acknowledging its superiority in DVP and cross-border payments.
2. Expand: Utilize their most powerful weapons — regulatory trust and legal resources — to promote the revision of the 2023 "Funds Settlement Act," creating a legal framework for "trust-type" stablecoins that is exclusive to banks and trust institutions and has "no limits."
3. Incorporate: Through this "top-level design," successfully divide the market into two.

• JPYC: Permanently "constrained" within the DeFi and retail small payment "sandbox" by the legal framework of the "1 million yen wall," preventing it from touching institutional-level systemic financial business.
• Progmat: Becomes the only compliant, unlimited, institutionally endorsed "institutional channel" by the three major banks and exchanges.

Through this strategy, Japan's financial giants have successfully built a deep "TradFi compliance moat" without stifling Web3 innovation. They leverage the legal framework to ensure that in the foreseeable future, all high-value, systemic financial activities must and can only operate on the "Track Two" they control.

Intent Three: Monopolizing the "Settlement Toll Booth" of the RWA Economy

If "neutrality" is its organizational form and "compliance moat" is its defensive means, then its ultimate and most core strategic intent is "offensive" — to fully control the "core toll booth" of Japan's next-generation digital finance.

In the emerging "asset side" of security tokens, the Progmat platform has already captured 64.6% of the issuance share, achieving an almost monopolistic first-mover advantage.

The strategic loop of the three major bank alliance is now completely clear:

1. Step One (Asset Side): Through the Progmat platform, monopolize the "asset issuance" of Japan's ST/RWA (real estate, bonds) in advance.
2. Step Two (Cash Side): Through the alliance of the three major banks, issue a unified, unlimited Progmat stablecoin (SC), becoming the only compliant "cash settlement" tool in this hundreds of billions-level ST market.

Conclusion: Japan's "Partition and Construction" Digital Asset Strategy

Through the above analysis, we can draw an objective conclusion about the "dual-track" pattern of Japanese stablecoins and their future. JPYC and the common stablecoins at the current market stage are not in direct competition but rather serve parallel tracks for distinctly different markets. They cater to entirely different user groups and address different market issues.

The yen stablecoin has entered the stage of "partitioned regulation" and "top-level construction." On one hand, regulators are bringing bottom-up Web3 retail innovations like JPYC "under regulation"; at the same time, they have set up a "regulatory sandbox" for it. This is akin to establishing a legal firewall, isolating the systemic financial risks that these innovations may bring from the local core financial system. On the other hand, regulators have designed a new compliance path for banks and trust institutions, directly targeting the core of Japan's financial system: corporate settlements and capital markets.

Looking ahead to the next three years, these two tracks are likely to continue to develop in parallel. Track One will continue to explore innovations in DeFi, Web3 gaming, and retail payments. Track Two will focus on the "tokenization" (ST) of Japan's trillions of dollars in RWAs and achieve efficient circulation through bank stablecoins (SC).

About Movemaker

Movemaker is the first official community organization authorized by the Aptos Foundation, jointly initiated by Ankaa and BlockBooster, focusing on promoting the construction and development of the Aptos ecosystem in the Chinese-speaking region. As the official representative of Aptos in the Chinese-speaking area, Movemaker is committed to building a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and numerous ecological partners.

Disclaimer:

This article/blog is for reference only, representing the author's personal views and does not reflect the position of Movemaker. This article does not intend to provide: (i) investment advice or recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets, including stablecoins and NFTs, carries high risks, significant price volatility, and may even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For specific issues, please consult your legal, tax, or investment advisor. The information provided in this article (including market data and statistics, if any) is for general reference only. Reasonable care has been taken in compiling this data and charts, but no responsibility is accepted for any factual errors or omissions expressed therein.

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