Author: @BlazingKevin_, the Researcher at Movemaker

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, collectively forming a result of "top-level design."

The first track is a bottom-up development path, represented 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, dominated by traditional financial giants. Its core representative is the recent announcement by Japan's three major banks (Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho) to jointly promote a stablecoin framework based on the Progmat platform. The goal of this track is to serve regulated, institutional-level corporate settlements and the securities 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 do the legal frameworks they each rely on fundamentally determine their market positioning? What traditional financial "pain points" do they each technically address? Especially regarding the institutional alliance of the three major banks, what are the true strategic intentions and technical considerations behind it?

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 cases, we must first comprehend its fundamental legal status evolution that occurred in 2025.

Compliance Upgrade from "Prepaid Tool" to "Funds Transfer Tool"

In the early exploratory phase, JPYC's operating entity, JPYC Inc., adopted a flexible legal framework—"prepaid payment tool." Under this framework, JPYC was legally closer to a "game point" or "shopping 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 system."

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

The prepaid version of JPYC ceased issuance in June 2025. Instead, JPYC Co., Ltd. officially obtained a license as a "Type 2 Funds Transfer Business" after a lengthy application process.

This "compliance upgrade" is significant. It fundamentally transformed JPYC's legal status: from a non-redeemable "point," upgraded to a regulated, compliant, legally redeemable for yen "funds transfer tool." 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 cannot exceed 1 million yen.

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

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 payments, and the securities token market (which we will elaborate on later).

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 limited. 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 "Unlimited" Institutional Alliance of the Three Major Banks and 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" 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 entirely 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 tools" 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 authorities' "top-level design." Japan is a "code-based legalism" country, where the behavioral logic of market participants (especially large financial institutions) is "'gray areas' are prohibited." This is in stark contrast to the U.S. "case law" perspective where "gray areas are permissible."

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

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

Participants in Track Two chose a unified technical foundation—the 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:

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

Thus, Progmat is not a tech 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 (securities tokens), UT (utility tokens), and SC (stablecoins) are its three core pillars. ST represents tokenized "assets" (such as real estate), while SC serves as the "cash" for payment and settlement of 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.

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

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

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

1. Interoperability:

   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."

2. Cross-Border Payments:

   Traditional "bank remittances" require a lengthy chain composed of "intermediary banks." This process incurs "high intermediary costs, and delays in arrival." The stablecoin system operates on a P2P model, transferring directly from one address to another, minimizing "intermediary costs and enabling instant transfers."

3. Rigidity of Core Systems:

   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: Banks in Japan and globally 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 'transfer' operations." All updates (such as transfers) must be initiated through the internal online banking system.
• Dilemma: Implementing 24/7 external programmable calls directly on the "core banking accounting system" would require "massive renovations, which are unavoidable." This is nearly 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 need 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 then on, all 24/7 programmable, smart contract calls and B2B automatic settlements occur entirely at the trust and blockchain level, completely isolating them from the bank's "core banking accounting system."

4. Redemption: When users need to redeem, the trust destroys the stablecoins on-chain and returns fiat currency to the bank's account through traditional channels.

This architecture grants the bank's deposits (yen) 24/7, low-cost, cross-border, and most importantly—"programmability"—without touching the bank's core accounting system.

2. Market Positioning of "DeFi" and "Institutions"

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 the "trust-type" license, constructing an institutional-level settlement network with "no transaction limit."

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

JPYC: "On-Chain Yen" Serving Global DeFi

JPYC's core user group: global, permissionless, crypto-native economic participants with transaction amounts below 1 million yen.

The core pain point JPYC addresses is the absence of "on-chain yen," a critical 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 world's major reserve and trading currencies, has long been absent.

The emergence of JPYC is the first compliant, redeemable on-chain yen solution. One of its core use cases is 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

JPYC's most core and unique financial use case 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-yield dollars, and invest in high-interest assets (such as U.S. Treasury bonds), thereby capturing the substantial 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 JPYC addresses is the "decentralization" and "permissionless" execution of this professional 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 environment anchored to fiat currency, the on-chain borrowing rate (Borrow APY) for JPYC is extremely low, far below other mainstream assets.
3. Exchange: The user immediately sells the borrowed JPYC on a DEX (such as Curve or Uniswap) for high-yield dollar stablecoins (like USDC or USDT).
4. Deposit for Yield: The user then deposits the exchanged USDC into a lending protocol's deposit pool or yield aggregator (like Yearn Finance), earning significantly higher deposit interest (Supply APY) than the JPYC borrowing cost, thus capturing the spread between the two.

The action of "borrowing JPYC and exchanging it for USDC" itself is a form of on-chain shorting priced in yen. JPYC's redeemability, public chain composability, and 1 million yen limit align perfectly with the needs of global DeFi traders executing such medium-low volume, high-frequency arbitrage.

Pain Point Three: Yen Micropayments within 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 precisely 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 large enterprises, institutional investors, securities firms, and banks themselves 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 of traditional B2B cross-border payments is global. A bank remittance through the SWIFT system requires a complex chain composed of "intermediary banks." This process not only incurs 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 trading companies like Mitsubishi Corporation, there is a massive daily demand for fund settlements worldwide. The stablecoins based on the Progmat platform provide them with the first compliant, unlimited, P2P alternative. It allows companies to make instant transfers directly from one address to another, minimizing intermediary costs. Its core users are the finance departments of multinational corporations.

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

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

The brilliance of the "bypass" architecture (bank ➡️ trust ➡️ blockchain) lies in its ability to grant programmability to bank deposits (yen) 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 Securities 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—securities 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 buyers and sellers.
• On-Chain DVP: The buyer holds "cash" (i.e., Progmat stablecoins), and the seller holds "assets" (i.e., Progmat securities tokens). Through smart contracts, the two 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 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 multi-hundred billion yen, rapidly growing securities token and RWA market currently lacks a compliant, efficient, native "on-chain cash settlement tool."

Therefore, the core strategic users of the "unlimited" stablecoins jointly issued by the three major banks are this multi-hundred billion 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 Intentions of the Three Major Banks

Addressing "pain points" is merely a superficial "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 arena?
2. Why "Progmat"? Why do the banks not build their own private platforms but choose to entrust this core infrastructure of future finance to a "neutral" entity that was spun off from Mitsubishi UFJ Trust Bank?

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

Intention 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 choice within the entire Progmat stablecoin framework. In the traditional financial world, payment and settlement are the banks' most core and fiercely competitive territories. 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 why the Progmat platform has taken center stage in history. The design of Progmat's shareholding structure perfectly embodies this strategic consideration of "neutrality." It spun off from Mitsubishi UFJ Trust Bank in 2023, which, while still the largest shareholder (42%), has had its control deliberately diluted.

More critically, Mizuho Trust, Sumitomo Mitsui Trust, SMBC, and even Norinchukin Trust all hold 6.5% shares, making them core shareholders alongside each other. Additionally, the alliance has brought in representatives for "circulation" (JPX, Japan Exchange Group), "sales" (SBI), and "technology" (NTT Data).

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

By sacrificing the absolute control of a single institution, Mitsubishi UFJ gains 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 it is the only path to success.

Intention Two: Defense and Counterattack ------ Building a "TradFi Compliance Moat"

The joint action of the three major banks is not only an offensive "building of a new continent" but also a crucial "defensive counterattack." Their defense targets are global, permissionless cryptocurrencies (like USDC, USDT) and emerging forces like JPYC.

From the perspective of traditional financial giants, if these "non-sovereign," "non-bank" issued stablecoins penetrate the B2B payment and securities settlement fields, the consequences would be disastrous: 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, extend, and assimilate" model:

1. Embrace: Actively embrace blockchain technology, acknowledging its superiority in DVP and cross-border payments.
2. Extend: 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, with "no limits."
3. Assimilate: 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."

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

Intention 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 intention is "offensive"—to fully control the "core toll booth" of Japan's next-generation digital finance.

In the emerging "asset side" of securities tokens, the Progmat platform has already captured 64.6% of the issuance share, achieving a near-monopoly first-mover advantage.

The strategic loop of the alliance of the three major banks 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).
2. Step Two (Cash Side): Through the three major banks' alliance, issue a unified, unlimited Progmat stablecoin (SC), becoming the only compliant "cash settlement" tool in this multi-hundred billion 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 stablecoins in Japan and its future. JPYC and the joint stablecoins currently in the market are not in direct competition but serve parallel tracks for entirely different markets. They cater to distinct user groups and address different market issues.

The yen stablecoin has entered a phase of "partitioned regulation" and "top-level construction." On one hand, regulators are bringing self-initiated Web3 retail innovations like JPYC "under regulation"; at the same time, they have set up a "regulatory sandbox." This is akin to establishing a legal firewall, isolating the systemic financial risks that these innovations may bring from the 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 will likely 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 multi-trillion yen RWA and achieve efficient circulation through bank stablecoins (SC).

About Movemaker

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Disclaimer:

This article/blog is for reference only, representing the author's personal views and does not represent 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.