Author: Kevin, Movemaker researcher; Source: X, @MovemakerCN

Introduction: The “Bifurcation” Pattern of Japanese Stablecoins

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

The first track is a bottom-up development path. A typical representative is JPYC. This track operates within the “fence” of the law 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 and unify the stablecoin framework issued based on the Progmat platform. The goal of this track is to serve regulated, institutional-level corporate settlements and the security token (ST) market.

This article will objectively and deeply deconstruct these two tracks, focusing on analyzing 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 solved technically that traditional finance could not? Especially regarding the institutional alliance of the three major banks, what are the true strategic intentions and technical considerations behind it?

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

1. Deconstructing the Dual Track - Legal Foundations and Technical Architecture

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

To understand the market positioning and technical use cases of JPYC, we must first understand the fundamental evolution of its legal status that occurred in 2025.

Compliance upgrade from “prepaid instruments” to “fund transfer instruments”

In the early exploratory stage, the operating entity of JPYC, JPYC Inc., adopted a flexible legal framework known as a “prepaid payment tool.” Under this framework, JPYC is legally closer to a “game point” or “store value card,” with the core feature being that it cannot be redeemed for yen.

This was a clever strategy during the regulatory vacuum at the time. It successfully circumvented the strict regulations of complex banking and fund transfer bills, allowing JPYC to be used as a “Yen-denominated point system.”

However, this “gray” phase has come to an end. With the revision of Japan's “Funds Settlement Act” in 2023, stablecoins are officially defined as “electronic payment instruments,” and the legal foundation of JPYC must also be upgraded accordingly.

The JPYC prepaid version will cease issuance in June 2025. In its place, JPYC Corporation has officially obtained a “Type 2 Funds Transfer Business” license after a lengthy application process.

This “compliance upgrade” is of great significance. It has fundamentally changed the legal status of JPYC: from a non-redeemable “point” to a regulated, compliant “fund transfer tool” that is legally allowed to be redeemed for Japanese yen. This truly makes it a “stablecoin” in terms of its legal attributes.

“The 1 Million Yen Wall”: Market Ceiling Defined by Legal Framework

However, this compliance upgrade, while granting it “redeemability”, also places a core “shackle” on it that determines its market positioning—namely, a “trading limit of 1 million yen”.

According to the framework of Japan's “Fund Settlement Act”, the core feature of the “Type 2 Fund Transfer Operators” license is to strictly prevent money laundering and protect consumers while promoting innovation. To this end, the regulations stipulate that the limit for a single transaction must not exceed 1 million yen.

This is the core limitation commonly referred to as the “1 million yen wall” by the Japanese financial community and the cryptocurrency industry.

This legal restriction fundamentally determines the market positioning of JPYC. 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 securities token market (which we will elaborate on later).

Therefore, the technical architecture and core use cases of JPYC must be developed under the two premises of “redeemable” and “1 million yen limit.” Its technical architecture is inherently geared towards public chains. It must be deployed on global public blockchains such as Ethereum, Polygon, and Solana to serve its core DeFi market. The design of its smart contracts must be permissionless to freely integrate with global DEXs, lending protocols, and yield aggregators.

However, at the same time, this open technological architecture is constrained by the legal limits of its “second category” license. This creates a unique dual state: JPYC is technically global, permissionless, and without limits (the smart contract itself does not restrict the transfer amount); but legally (when applied to regulated Japanese entities or individuals), it is restricted and has limits. This legal and technological “discrepancy” naturally makes it a tool for serving the “gray area” and the pure Web3 economy, while being unable to serve as the settlement layer for mainstream finance in Japan.

Track Two: The “Unlimited” Institutional Alliance of Three Major Banks and Progmat

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

A brand new legal foundation based on the “Trust Law”

The legal basis of Track Two completely bypasses the “funds transfer business” framework to which JPYC belongs. What it relies on is the legal path for “trust-type stablecoins” tailored for banks and trust institutions in the 2023 amendment of the “Funds Settlement Act.”

Recently, the joint announcement of 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 Features: This is the most critical legal distinction. “Electronic payment instruments” issued based on banking or trust licenses do not have a legal transaction limit of 1 million yen.

The difference in legal status is a direct reflection of the “top-level design” carried out by Japanese regulatory authorities. Japan is a “civil law” country, and the behavior logic of market participants (especially large financial institutions) is that “the 'gray area' is prohibited.” This is in stark contrast to the American case law principle where “the gray area is permissible.”

Therefore, before the new bill was introduced in 2023, Japan's institutional-grade stablecoin market was nonexistent. The passage of the new bill did not “regulate” the existing market, but rather “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 have chosen a unified technology base - the Progmat platform. To understand its technical architecture, one must first understand its shareholder composition.

Progmat became an independent company in 2023 after separating from Mitsubishi UFJ Trust Bank. Its shareholder lineup almost 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%), Agriculture Bank Trust (6.5%).
• Exchange (Circulation Layer): JPX (Japan Exchange Group, 4.3%).
• Broker (Sales Layer): SBI PTS Holdings (4.3%).
• Technology (Infrastructure Layer): NTT Data (11.7%), Datachain (4.3%).

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

In Progmat's technical blueprint, ST (Security Token), UT (Utility Token), and SC (Stablecoin) are its three core pillars. ST is the tokenized “asset” (such as real estate), while SC is the “cash” used to pay and settle these assets. The issuance of stablecoins by the three major banks is the final and most crucial piece of the “payment and settlement puzzle” that completes Progmat's grand blueprint for the “ST (RWA) market.”

The driving force behind bank stablecoins: the technical “bypass” of the “core banking system”

A core question arises: Why would banks need to “go out of their way” to build a stablecoin platform on the blockchain when they already have a mature and efficient internal payment system?

The answer is that bank stablecoins are not meant to replace the existing system, but to address three core “pain points” that the existing system cannot resolve, the most critical of which is the rigidity of its 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 their “availability is limited”. In contrast, blockchain-based stablecoins (SC) can achieve “mutual exchange”, and “anyone can access them anywhere”.
2. Cross-border Payments: Traditional “bank remittances” require a lengthy chain consisting of “intermediary banks.” This process has “high intermediary costs and significant delays in receipt.” In contrast, the stablecoin system is a P2P model that allows transfers directly from one address to another, enabling “minimized intermediary costs and instant transfers.”
3. Rigidity of the core system: This is key to explaining why banks “must” adopt “trust-based” stablecoins instead of directly opening their own bank accounts (i.e., “deposit tokens”).

- Current Situation: The banking IT systems in Japan and around the world rely on a closed, outdated but extremely stable system known as the “core banking system.”

- Problem: This is a “large, cumbersome, outdated” system. Its key flaw is that it “does not support APIs for 'write' or 'transfer' operations.” All updates (such as transfers) must be initiated through the internal online banking system.

- Dilemma: If external programmable calls are to be implemented directly on the “core banking accounting system” 24/7, it will require a “massive overhaul, which is inevitable.” This is almost unacceptable for any bank in terms of IT costs and financial stability risks.

The “trust-type” structure provides a perfect “bypass” solution:

1. Bank Side: The bank (as the principal) transfers funds into the “trust” (as the trustee). This is a standard, mature financial operation that occurs daily. The bank's “core banking system” does not require any new development.
2. Trust Side: Trust (empowered by the Progmat platform) issues an equivalent amount of stablecoins on the blockchain.
3. On-chain: From now on, all 7x24 hours of programmable smart contract calls and B2B automatic settlements will occur at the trust and blockchain level, completely isolated from the bank's “core banking system.”
4. Redemption: When users need to redeem, the trust destroys the stablecoin on-chain and returns the fiat currency to the bank's account through traditional channels.

This architecture, without touching the core banking accounting system at all, gives bank deposits 24/7, low-cost, cross-border, and most importantly – “programmability.”

2. Market Positioning of “DeFi” and “Institutions”

We see that JPYC is defined by the “Second Class Fund Transfer Business” license and the “1 million yen transaction limit”; while Track II (Progmat Alliance) has built an institutional-level settlement network based on a “trust-type” license with “no transaction limit.”

They are the key to defining the market, segmenting customers, and addressing specific pain points. In this chapter, we will delve into how these two tracks meet the urgent needs of core users and address specific “pain points” in traditional finance and the Web3 economy.

JPYC: The “On-Chain Yen” Serving Global DeFi

The core user group of JPYC: namely, global, permissionless, cryptocurrency-native economic participants with transaction amounts below 1 million yen.

The core pain point addressed by JPYC is the absence of the key asset “on-chain yen” in the global DeFi ecosystem.

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

In global decentralized exchanges (DEX), USDC, USDT, ETH, and WBTC form the cornerstone of liquidity. However, the Japanese yen, as one of the world's major reserve and trading currencies, has been long 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 foundation for JPYC/USDC or JPYC/ETH trading pairs. This effectively creates an efficient yen spot foreign exchange market, allowing any DeFi user globally to exchange yen for mainstream crypto assets at any time. Its core users are DeFi traders, arbitrageurs, and Web3 protocols that require yen exposure.

Pain Point 2: Arbitrage Tool for “Tokenizing” Japan's Macroeconomic Environment

The most core and unique use case of JPYC at the financial level is that it successfully “tokenizes” Japan's unique macro-financial environment—long-term low interest rate policies—and introduces it into DeFi.

In the traditional finance sector, 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 US dollars, and invest in high-interest assets (such as US Treasury bonds), thereby steadily capturing the huge spread between the two.

However, this operation has traditionally been the patent of institutions, making it difficult for ordinary investors to participate. The pain point that JPYC addresses is to “decentralize” and “make permissionless” this professional-grade financial strategy.

Within the legal framework of the “1 million yen limit”, JPYC has become the perfect tool for DeFi players to execute such arbitrage operations. A typical “on-chain yen arbitrage trading” 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. Lending: The user chooses to lend JPYC. Due to the zero interest rate environment of the anchored fiat currency, the borrowing interest rate (Borrow APY) of JPYC on-chain is extremely low, far below that of other mainstream assets.
3. Swap: Users immediately sell the borrowed JPYC on a DEX (such as Curve or Uniswap) for high-yielding dollar stablecoins (such as USDC or USDT).
4. Deposit for Interest: Users can deposit the USDC obtained into the deposit pool of the lending protocol or yield aggregator (such as Yearn Finance) to earn deposit interest (Supply APY) significantly higher than the borrowing cost of JPYC, thereby capturing the interest rate spread between the two.

The action of “lending JPYC and exchanging it for USDC” is in itself a short-selling activity executed on-chain, priced in Japanese yen. The redeemability of JPYC, its composability on public chains, and the cap of 1 million yen make it suitable for global DeFi traders to execute such medium to low amount, high-frequency arbitrage.

Pain Point Three: Yen Micropayments in the Web3 Ecosystem

In addition, JPYC also serves the local Web3 ecosystem in Japan. For developers of NFT markets, on-chain games, or Web3 applications, they need a native yen payment tool for small transactions. JPYC perfectly meets the need for “micropayments” and “in-ecosystem settlements.”

Progmat: “B2B Institutional Settlement Tool” Serving TradFi

In contrast to JPYC, the Progmat Alliance of Track 2 is not primarily aimed at global DeFi traders, but rather at large enterprises, institutional investors, securities companies, and banks in Japan and globally.

The issue to be addressed is the systemic “pain points” in the mainstream financial system of Japan that JPYC cannot reach.

Pain Point One (External): B2B Cross-border and Corporate Fund Settlement (SWIFT Pain Point)

The pain points of traditional B2B cross-border payments are global. A bank transfer through the SWIFT system requires going through a complex chain composed of “intermediary banks.” This process not only incurs high intermediate costs (fees, exchange rate differences) but, more seriously, has extremely poor timeliness (T+N crediting) and is limited by non-24/7 operational hours.

For global integrated trading companies like Mitsubishi Corporation, there is a massive demand for funds settlement on a daily basis worldwide. The three major banks have provided the first compliant, unlimited, P2P alternative based on the Progmat platform's stablecoin. It allows businesses to make instant transfers directly from one address to another, minimizing intermediary costs. Its core users are the finance departments of multinational companies.

Pain Point Two (Internal): Modernization of the Bank's Core System

The second core user pain point addressed by “trust-based” stablecoins is the pain point of the banks themselves.

The brilliance of the “bypass” architecture (bank ➡️ trust ➡️ blockchain) lies in its ability to give “programmability” to bank deposits (yen) without touching the bank's core accounting system at all. This is a low-cost, low-risk, and highly efficient modernization solution for the banking system.

Pain Point Three: “Delivery Versus Payment” (DVP Pain Point) in the Security Token Market

If B2B settlement is its direct application, then the ultimate goal of the Progmat stablecoin is to provide a “cash pillar” for another major pillar of its ecosystem - security tokens.

The cornerstone of financial market settlement is DVP (Delivery versus Payment), which means “securities and funds settlement”.

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

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

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

The securities token and RWA market, worth hundreds of billions of yen and currently experiencing rapid growth, is in need of a compliant, efficient, and native “on-chain cash settlement tool.”

Therefore, the “unlimited” stablecoin jointly issued by the three major banks targets the core strategic users of the trillion-level ST/RWA market. Its goal is to become the only compliant, institutional-grade DVP settlement tool in this emerging capital market, thereby completing the final closed loop of “asset issuance” and “fund settlement” on the Progmat platform.

3. The Real Strategic Intent of the Three Major Banks

Solving the “pain points” is merely a superficial “tactical objective.” The deeper question we truly need to answer is:

1. Why is it called “Alliance”? Why would Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho, the three largest competitors in the traditional financial sector, choose to “unite” and act together in this core arena?
2. Why is it called “Progmat”? Why do banks not build their own private platforms, but instead choose to entrust this core infrastructure of future finance to a unified, “neutral” entity that has been “spun off” from Mitsubishi UFJ Trust Bank and has dispersed equity?

The 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 “Greatest Common Divisor” of the Industry

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, payments and settlements are the core and most fiercely competitive territories for banks. It is commercially impossible for any bank (such as Mitsubishi UFJ) to attempt to build a private, exclusive stablecoin settlement platform and require its competitors (like Mizuho and Sumitomo Mitsui) to join and use it.

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

Therefore, the three major banks all recognize that in order 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 been brought to the historical stage. The equity structure design of Progmat perfectly illustrates this strategic consideration of “neutrality.” It became independent from Mitsubishi UFJ Trust Bank in 2023, which, although still the largest shareholder (42%), has deliberately diluted its control.

More importantly, Mizuho Trust, Sumitomo Mitsui Trust, SMBC, and even Norinchukin Trust have all become core shareholders with a 6.5% stake. At the same time, the alliance has also brought in JPX (Japan Exchange Group), representing “liquidity”, SBI representing “sales”, and NTT Data representing “technology”.

This “all-star” equity structure aims to convey a clear message to the market: Progmat is not the “private property” of Mitsubishi UFJ, but rather an “industry public infrastructure” jointly funded and recognized by the core financial powers of Japan.

By sacrificing the absolute control of a single institution, Mitsubishi UFJ has gained something far more valuable than control itself—industry-wide adoption and consensus. This is the “price” that must be paid to build a unified “national team” infrastructure, and it is 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 move to “build a new continent,” but also a crucial “defensive counterattack.” The target of this defense is global, permissionless cryptocurrencies (such as USDC, 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 will be catastrophic: the core settlement business of banks will be completely “disintermediated.”

Therefore, the three major banks must take the initiative before the power of Web3 forms an overwhelming momentum. The strategic logic is the classic “embrace, extend, and extinguish”:

1. Embrace: Actively embrace blockchain technology, acknowledging its superiority in DVP and cross-border payments.
2. Expansion: Leverage its most powerful weapons—regulatory trust and legal resources—to promote the revision of the 2023 “Fund Resolution Act,” creating a legal framework for “trust-type” stablecoins that is exclusive to banks and trust institutions, with no limits.
3. Incorporation: Through this “top-level design”, the market has been successfully “divided into two parts”.

- JPYC: Permanently “curbed” by the legal framework of the “1 million yen wall,” it remains confined within the DeFi and retail micro-payment “sandbox,” unable to touch institutional-level systemic financial operations.

- Progmat: Become the only compliant, unlimited “institutional channel” jointly endorsed 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 utilize legal frameworks to ensure that all high-value, systemic financial activities must and can only operate on the “Track Two” that they control in the foreseeable future.

Intention Three: Monopolize the “Settlement Toll Station” 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 to “attack” —— that is, to fully control the “core toll booth” of Japan's next-generation digital finance.

In the emerging “asset sector” of security tokens, the Progmat platform has already captured 64.6% of the issuance share, achieving a near-monopoly first-mover advantage.

The strategic closed loop of the three major bank alliances 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): Issue a unified, unlimited Progmat stablecoin (SC) through the three major bank alliances, becoming the only compliant “cash settlement” tool in this trillion-level ST market.

Conclusion: Japan's “Partition and Construction” Digital Asset Strategy

Through the above analysis, we can draw an objective conclusion about the pattern and future of Japan's stablecoin “dual-track system.” JPYC and the common stablecoin are not in a direct competitive relationship at the current market stage, but rather serve parallel tracks for distinctly different markets. They cater to completely different user groups and address entirely different market issues.

The Japanese 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 brand new compliance path for banks and trust institutions “at the top level,” directly targeting the core of the Japanese financial system: corporate settlements and capital markets.

Looking ahead to the next three years, these two tracks are likely to continue developing in parallel. Track One will continue to explore innovations in DeFi, Web3 games, and retail payments. Track Two will focus on the “securitization” (ST) of Japan's trillions of dollars in RWA and achieve its efficient circulation through bank stablecoins (SC).