JPYC: Japanese Yen stablecoin

Earlier this week, JPYC, a Japanese stablecoin company, hosted a webinar (in Japanese), covering JPYC’s mission, company overview, the stablecoin landscape in Japan, JPYC’s features and use cases, its development kit, future plans, and a Q&A session.

JPYC’s Mission and Overview

Noritaka Okabe, the founder of JPYC, starts by introducing JPYC’s mission: to overcome societal stagnation. He believes JPYC can facilitate innovation by providing a low-cost, efficient payment infrastructure. He recounts his experiences with high transaction fees in the early 2000s and emphasizes the potential of stablecoins to change this. He highlights the massive trading volume of USD-backed stablecoins (around 500 trillion yen monthly) and their compatibility with automated systems, particularly in the growing field of AI and machine-to-machine (M2M) transactions.

JPYC, a Web3 startup established about five years ago, has grown to 25 employees. A key differentiator is that Circle, the issuer of USDC, was the first company to invest in JPYC. The company has a robust structure, with an audit committee and three years of unqualified audit opinions. Okabe introduces the leadership team, including himself (a serial entrepreneur), Koichi Hirano (CFO and CCO), external board members with experience in venture capital and fintech, and external audit and supervisory board members with legal, accounting, and Web3 expertise.

JPYC’s journey began with a proof-of-concept and regulatory discussions with Japan’s Financial Services Agency (FSA) in 2020. They launched the first JPYC as a prepaid payment instrument in January 2021, followed by integrations with Visa prepaid cards, Gifty Box, and various payment platforms. In March 2022, JPYC obtained registration as a third-party prepaid payment instrument with the FSA. Since then, they’ve expanded functionalities like hometown tax payments through the platform and formed partnerships with prominent financial institutions like Mitsubishi UFJ Trust and Banking Corporation and Hokkoku Bank. JPYC boasts a nearly 100% market share in the domestic stablecoin market, with over 30 billion yen issued.

The Stablecoin Landscape in Japan

Okabe explains the various types of stablecoins in Japan. He clarifies that “stablecoin” is a broad term, while “electronic payment instrument” (as defined by Japanese law) is a narrower category requiring 100% backing by cash or government bonds. JPYC plans to be involved with most types of stablecoins, including:

• First-type electronic payment instruments: Primarily issued by funds transfer businesses (like JPYC). JPYC will both issue and exchange these.
• Third-type electronic payment instruments: Trust-based stablecoins, such as JPYC Trust (issued in collaboration with Mitsubishi UFJ Trust and Banking Corporation). JPYC will sell these through their exchange business license.
• Foreign electronic payment instruments: Primarily USDC and EuroC. JPYC will facilitate exchanges with these.
• Deposit-type digital currencies: Issued by commercial banks. JPYC aims to enable future exchange with these.

JPYC currently issues a prepaid JPYC and intends to handle all stablecoins except algorithmic stablecoins (like Terra) and those requiring a cryptocurrency exchange license.

JPYC’s Features and Use Cases

JPYC is pursuing licenses for Funds Transfer Business and Electronic Payment Instrument Exchange Business. The key features of JPYC include its programmability (usable by humans, systems, and AI) and its zero transaction fees. Unlike the prepaid version, the new JPYC will be redeemable 1:1 with the Japanese yen after user verification.

Other key features of JPYC include:

• No registration required: Use is permissionless, similar to cash.
• Zero transaction fees: No merchant registration or associated costs.
• Accounting treatment equivalent to bank deposits: Simplifies accounting and tax processes for businesses.
• No issuance or redemption fees, and no setup costs: Lowers the barrier to entry for businesses.
• Programmable and extensible: Enables automated payments, smart contracts, and integration with AI.

Okabe explains the benefits in detail. The lack of registration requirements makes JPYC easy to integrate into various systems. Zero transaction fees eliminate costs usually associated with payment processors. The straightforward accounting treatment makes it easier for businesses, especially large corporations, to adopt JPYC. The programmability of JPYC allows for automated payments, smart contracts, and integration with AI-driven systems.

JPYC’s revenue model involves generating returns on the reserve assets backing JPYC and charging exchange fees for converting between JPYC and other stablecoins (like USDC). This incentivizes JPYC to promote wider adoption and usage of its stablecoin.

JPYCX and the JPYC SDK

Users will need an account with JPYCX, JPYC’s exchange platform, which will require identity verification through a My Number card. This verification is necessary for buying and selling JPYC but not for receiving or spending it. JPYC will initially be available on major EVM-compatible blockchains like Ethereum and Polygon.

JPYC is highly versatile, facilitating international transfers, micropayments, and system integrations. It can be used for payroll automation, smart contracts, and AI-driven trading. Real-time transaction monitoring enables functionalities like instant payment notifications and predictive analysis.

JPYC offers a free and open-source SDK (Software Development Kit) with APIs for developers. This SDK allows for building custom applications using JPYC, including automated payments and smart contracts. The SDK is designed for easy integration, requiring minimal resources. Existing Web3 code can often be repurposed for JPYC, as it shares similarities with USDC.

Future Plans and Q&A

JPYC is currently finalizing its license applications. Once approved, they will launch the new JPYC and the JPYCX platform. The Japanese government is also working on a simplified licensing framework for electronic payment instrument exchange businesses, which could further streamline operations.

Please follow us to read more about Finance & FinTech in Japan, like hundreds of readers do every day. We invite you to also register for our short weekly digest, the “Japan FinTech Observer”, on Medium, on LinkedIn, or on Substack.

We also provide a daily short-form Japan FinTech Observer news podcast, available via its Podcast Page. Our global Finance & FinTech Podcast, “eXponential Finance” is available through its own LinkedIn newsletter, or via its Podcast Page.

Should you live in Tokyo, or just pass through, please also join our meetup. In any case, our YouTube channel and LinkedIn page are there for you as well.