FSA Panel Warns Heavy Stablecoin Redemptions Could Force JGB Fire-Sale

Redemption Run Could Force Bond Sales

A member of Japan's Financial Services Agency study group on digital and decentralized finance has warned that a wave of stablecoin redemptions could force a major issuer into a fire-sale of the government bonds backing its tokens. The FSA published the minutes of the panel's first meeting, held on October 20, and the record shows one participant asking whether existing rules can absorb a large redemption demand on an issuer of electronic payment instruments, the legal term Japan uses for stablecoins. If a big issuer faced simultaneous redemption requests, it would have to sell the Japanese government bonds held as reserves, and the member asked the group to verify whether the framework is strong enough for that stress. The study group's remit covers the institutional setting for on-chain finance built on blockchains, including tokenization, stablecoins and decentralized trading and lending.

The Bank of Japan sits at the center of the same market. It owns close to half of the country's outstanding bonds, carries roughly $7 trillion in debt, and is trimming its purchases, which narrows the pool of natural buyers if an issuer ever has to sell in size. Token lending drew a separate flag. One member said a company that issues tokens while also lending them out can look as if it is soliciting investment, and questioned whether current rules even cover the arrangement. The concern is investor protection, the same priority members set for the decentralized-finance debate. The panel also registered a shift abroad. Global interest in stablecoins appears to be cooling, members said, with attention moving toward tokenized deposits, which pay interest on the underlying balance and therefore sit closer to a yield-bearing stablecoin than to a conventional one. Price swings and anti-money-laundering frictions have made stablecoins awkward for cross-border transfers, and the minutes ask for a balanced debate that weighs overseas conditions.

DeFi Gaps and the Gatekeeper Question

Decentralized exchanges and other platforms that trade and lend without a central company filled a separate stretch of the October 20 session. Members said Japan should decide how it intends to approach DeFi and the DEX model before it drafts rules, and should work out its response to the report the Financial Action Task Force published in July on DeFi. Several warned that the country must not become a place where weak or missing rules are exploited, and asked who would take the gatekeeper role traditional financial institutions have held. Investor protection and market integrity were named as topics for priority discussion. Nomura Holdings and Securitize Japan addressed the panel and asked for DeFi and wallet rules as flexible as those applied overseas. The study group convened its second meeting on November 2.

Public blockchains drew caution. The minutes note that an open network anyone can join makes anti-money-laundering checks harder to trust, a concern the Financial Stability Board shared when it found significant gaps and inconsistencies in how jurisdictions implement its crypto and stablecoin recommendations. Members also questioned whether banks and other financial firms can hold assets on a public blockchain safely and return them to their rightful owners. On incident response, the group said a system should specify who may halt activity, on what scale, or else disclose those limits clearly to users. On tokenized securities, one member proposed studying the tokenization of highly liquid listed equities. The same member argued that blockchain's essential change is moving the management of customers and trades from account-based control to signing-key-based control, and urged priority work on a more advanced transfer system. In general discussion, the panel agreed that tokenized payment instruments and assets carry real value for society, provided rules are weighed against the purpose of existing regulation and the risk of regulatory arbitrage. The FSA released the minutes with speaker names withheld.

JPYC Bets Its Reserves on the Same Bonds

Panel fear and issuer ambition point at the same market. JPYC founder and CEO Noritaka Okabe has argued that reserves behind the company's token, launched in October 2025 after Payment Services Act changes, should go 80% into government bonds and 20% into bank deposits, with 10 trillion yen (about $66 billion) in circulation targeted within three years. The Finance Ministry opened a separate study group on October 8 to examine tokenizing government bonds, against a record budget request of 143 trillion yen (about $944 billion) and debt-servicing costs near 36.64 trillion yen (about $242 billion). Fresh structural demand for Japanese government bonds (JGBs) is welcome while the largest holder steps back; the panel's task is to keep redemption pressure from turning that demand into forced supply.