A high-level onchain finance forum in Japan, led by the Financial Services Agency (FSA), Digital Agency, Ministry of Finance, Bank of Japan, and the Japanese Bankers Association, discussed linking onchain and offchain payments to create a stable, safe payment infrastructure.

Yen-backed stablecoins could enable refunds to digital wallets and run around the clock, potentially improving the efficiency of public transactions.

Stablecoins may streamline government operations and refund processes, signaling possible shifts in how digital currencies are used in public finance.

The discussion takes place within a broader global regulatory context where authorities seek clearer rules and greater cooperation on digital currency regulation.

The government, with the FSA and Digital Agency, is exploring expanding onchain finance to public subsidies, government bonds and interbank payments, with a public-private roadmap planned for early 2027.

Key considerations include technology choice, risk management, transparency, and building trust with auditable records from transaction to settlement, while avoiding attempts to eliminate all risks.

Some experts warned that Japan’s banks risk lagging behind global peers if domestic systems don’t modernize, potentially pushing payment operations abroad, and emphasized evaluating when to replace legacy systems with tokenised options.

The Bank of Japan is conducting technical tests of central bank deposits for blockchain-based payments via a DLT-linked sandbox, exploring the link between central bank funds and blockchain payments.

These discussions reflect growing regulatory interest in digital currencies and efforts to integrate them into public finance and policy.

Experts stress a careful, staged rollout of onchain finance, starting with concrete use cases and gradual scaling to avoid a chicken-and-egg scenario between infrastructure and applications.

Globally, stablecoins total about $310 billion in outstanding supply, with about 83% in dollar-based stablecoins, and tokenised deposit activities are already underway in some jurisdictions.

Japan’s government is discussing the role of stablecoins in policy, including yen-backed stablecoins.