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

Introduction: The “dualization” pattern of Japanese stablecoins

Japan’s stablecoin market is showing a “dual-track” or “dualized” development pattern.This pattern is not an accidental market evolution, but the result of “top-level design” formed by Japan’s unique regulatory framework, deep-seated industrial needs, and completely different technology implementation paths.

The first track is a bottom-up development path.Its typical representative is JPYC.This track is within the “fence” of the law and mainly serves the global, permissionless DeFi ecosystem.

The second track is a top-down path led by traditional financial giants.Its core representative is the recent announcement by the three major Japanese banks (Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho) that they will jointly promote and unify the stablecoin framework issued based on the Progmat platform.The goal of this track is to serve the regulated, institutional-grade corporate settlement and security token (ST) markets.

This article will objectively and in-depth deconstruct these two tracks, focusing on analyzing their first pillar: legal foundation and technical architecture.We will explore in detail: How do the legal frameworks under which they operate fundamentally determine their market positioning?What “pain points” have they technically solved that traditional finance cannot solve?Especially the institutional alliance between the three major banks, what are the real strategic intentions and technical considerations behind it?

By analyzing these two tracks side by side, we will reveal Japan’s national strategy of compartmentalized management and parallel development in the crypto industry.

1. Deconstruction of dual tracks – legal basis and technical architecture

Track One: JPYC’s Legal Evolution and the “1 Million Yen Wall”

To understand JPYC’s market positioning and technology use cases, we must first understand the fundamental evolution of its legal status in 2025.

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

In the early exploration phase, JPYC’s operating entity, JPYC Inc., adopted a flexible legal framework – a “prepaid payment instrument.”Under this framework, JPYC is legally closer to a kind of “game points” or “stored value card for shopping malls”, the core feature of which is that it is not redeemable for Japanese yen.

It was a clever strategy during the regulatory vacuum at the time.It successfully circumvented the strict regulations of the complex Banking and Funds Transfer Act, allowing JPYC to function as a “yen-denominated point”.

However, this “grey” phase is over.With the revision of Japan’s “Financial Resolution Law” in 2023, stablecoins are officially defined as “electronic payment instruments”, and the legal basis of JPYC must also be upgraded accordingly.

The JPYC prepaid model will cease issuance in June 2025.Instead, JPYC Co., Ltd. officially obtained the “Type 2 Funds Transfer Business” license after a long application cycle.

This “compliance upgrade” is of great significance.It resulted in a fundamental shift in the legal status of JPYC: from a non-redeemable “point” to a regulated, compliant “funds transfer instrument” that is legally allowed to be redeemed into Japanese yen.This makes it truly a “stable currency” in terms of legal attributes.

The “1 million yen wall”: the market ceiling defined by the legal framework

However, this compliance upgrade, while giving it “redemptability”, also put on it a core “shackles” that determines its market positioning-namely, the “transaction limit of 1 million yen.”

According to the framework of Japan’s “Financial Resolution Law”, the core feature of the “Second Type Fund Transfer Operator” license is to strictly prevent money laundering and protect consumers while promoting innovation.To this end, regulations impose a cap of 1 million yen on a single transaction.

This is the core limit commonly referred to as the “1 million yen wall” in Japan’s financial and crypto industries.

This legal restriction fundamentally determines JPYC’s market positioning.It shows that JPYC cannot legally be used for large-scale transactions exceeding 1 million yen in a single transaction.This effectively isolates it from large inter-institutional clearing, B2B cross-border settlement, and (as we will discuss in detail below) the security token market.

Therefore, JPYC’s technical architecture and core use cases must be developed under the two premises of “redeemability” and “1 million yen upper limit”.Its technical architecture is naturally oriented to public chains.It must be deployed on global public blockchains such as Ethereum, Polygon, Solana, etc. to serve its core DeFi market.Its smart contracts must be designed to be permissionless so that they can be freely combined with DEXs, lending protocols and revenue aggregators around the world.

But at the same time, this open technology architecture is constrained by the legal upper limit of its “Class II” license.This creates a unique binary state: JPYC is technically global, permissionless, and uncapped (the smart contract itself does not limit the amount of transfers); but legally (when applied to regulated Japanese entities or individuals), it is restricted and capped.This “dislocation” of law and technology makes it naturally a tool serving the “gray area” and pure Web3 economy, but cannot become the settlement layer of Japan’s mainstream finance.

Track 2: The “uncapped” institutional alliance between the three major banks and Progmat

Now, we turn to track two.This is a completely different narrative, one driven not from the bottom up by the native power of Web3, but built from the top down by the “top design” of Japanese finance.

A new legal basis based on “Trust Law”

The legal basis of Track 2 completely bypasses the “funds transfer industry” framework to which JPYC belongs.It is based on the legal path for “trust-based stable coins” tailored for banks and trust institutions in the 2023 amendments to the “Capital Resolution Law”.

The recent joint announcement by Japan’s three major banks (Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho) is based on this new legal framework.Its core legal structure is:

1. Issuance structure: The three major banks will serve as “common trust trustees”, while Mitsubishi UFJ Trust Bank will serve as “single trust trustee.”

2. core features: This is the most critical legal difference.”Electronic payment instruments” issued based on a bank or trust license do not have a legal transaction limit of 1 million yen.

This difference in legal status is a direct reflection of the “top-level design” carried out by Japanese regulatory agencies.Japan is a country of “statutory legalism”, and the behavioral logic of market participants (especially large financial institutions) is that “the ‘grey area’ means no passage.”This is diametrically opposed to the “gray area is the general rule” under the “judicial jurisprudence” of the United States.

Therefore, there is zero institutional-grade stablecoin market in Japan until the new bill is introduced in 2023.The passage of the new bill does not “regulate” the existing market, but “creates” a new, compliant market that institutions can enter.

Progmat Platform: Deconstructing the technical architecture of the “Digital Asset National Team”

Participants in Track Two chose a unified technology base – the Progmat platform.To understand its technical architecture, one must first understand its shareholder makeup.

Progmat was spun off from Mitsubishi UFJ Trust Bank in 2023 and became an independent company.Its shareholder lineup almost includes the core strength of Japan’s finance and technology, and can be called the “digital asset national team”:

• Trust bank (issuing layer): Mitsubishi UFJ Trust (42%), Mizuho Trust (6.5%), Sumitomo Mitsui Trust (6.5%), Nongchu Trust (6.5%).

• Exchange (circulation layer): JPX (Japanese Exchange Group, 4.3%).

• Brokerage (sales level): SBI PTS Holdings (4.3%).

• Technology (infrastructure level): NTT Data (11.7%), Datachain (4.3%).

Therefore, Progmat is not a technology startup looking for disruptive innovation.It is an “infrastructure alliance” jointly funded by Japan’s core financial institutions. Its strategic goal is to become 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 (stable currency) are its three core pillars.ST is the “asset” being tokenized (such as real estate), while SC is the “cash” used to pay for and settle those assets.The issuance of stablecoins by the three major banks is the last and most critical piece of the “payment and settlement puzzle” that adds to the “ST (RWA) market” in Progmat’s grand blueprint.

The driver of bank stablecoins: a technological “bypass” to the “core banking system”

A core question arises: The bank already has a mature and efficient internal payment system, why should it “unnecessarily” build a stable currency platform on the blockchain?

The answer is that bank stablecoins are not intended to replace the existing system, but to solve three core “pain points” that the existing system cannot solve, 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.There is “no interoperability” between them, and “the scope of availability is limited.”Stablecoins (SC) based on blockchain can achieve “mutual interchange” and are “accessible to anyone and anywhere.”

2. Cross-border payment: Traditional “bank transfer” needs to go through a long chain composed of “relay banks”.This process “has high intermediate costs and large delays in arrival.”The stablecoin system is a P2P model that goes directly from one address to another, enabling “minimized intermediate costs and instant transfer.”

3. Rigidity of core systems: This is the key to explaining “why” banks must adopt “trust-based” stablecoins, rather than directly opening their own bank accounts (i.e. “deposit tokens”).

   – Current situation: Bank IT systems in Japan and around the world rely on a closed, old but extremely stable system called the “core banking accounting system”.

   – Question: It’s a “big, clunky, old” system.Its key flaw is that it has “no API to support ‘write’ or ‘transfer’ operations.”All updates (such as transfers) must be initiated through the internal online banking system.

   – Dilemma: If you want to implement 7×24-hour external programmable calls directly on the “core banking accounting system”, you will need “large-scale transformation, which is inevitable.”The IT costs and financial stability risks are barely acceptable for any bank.

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

1. bank side: The bank (acting as the trustor) transfers funds into a “trust” (acting as the trustee).This is a standard, mature financial operation that happens every day.The bank’s “core banking system” does not require any new development.

2. trust side: The trust (empowered by the Progmat platform) issues equal amounts of stablecoins on the blockchain.

3. on the chain: From now on, all 7×24-hour, programmable, smart contract calls, and B2B automatic settlements all occur at the trust and blockchain levels, completely isolated from the bank’s “core banking accounting system.”

4. redeem: When the user needs to redeem, the trust destroys the stable currency on the chain and returns the legal currency to the bank account through traditional paths.

This architecture, without touching the bank’s core 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 Type Fund Transfer Industry” license and the “1 million yen transaction limit”; while Track 2 (Progmat Alliance) builds an institutional-level settlement network with “no transaction limit” based on the “trust-type” license.

They are key to defining markets, segmenting customers, and solving specific pain points.In this chapter, we will conduct an in-depth analysis of which core users’ urgent needs are met by these two tracks, and which specific “pain points” in traditional finance and Web3 economy are solved.

JPYC: “On-chain Japanese Yen” serving global DeFi

JPYC’s core user group: global, permissionless, crypto-native economic participants with a transaction volume of less than 1 million yen.

The core pain point that JPYC solves is the lack of the key asset “on-chain Japanese yen” in the global DeFi ecosystem.

Pain point one: DEX liquidity and 7×24 Japanese yen foreign exchange market

In global decentralized exchanges (DEX), USDC, USDT, ETH and WBTC form the cornerstone of liquidity.However, the Japanese yen, one of the world’s major reserve and trading currencies, has been absent for a long time.

The emergence of JPYC is the first compliant and redeemable on-chain Japanese yen solution.One of its core use cases is as a liquidity base for the JPYC/USDC or JPYC/ETH trading pairs.This essentially creates an efficient Japanese yen spot foreign exchange market, allowing any DeFi user in the world to exchange Japanese yen with mainstream crypto assets at any time.Its core users are global DeFi traders, arbitrageurs, and Web3 protocols that require Japanese yen exposure.

Pain point 2: Arbitrage tools that “tokenize” 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 policy—and introduces it to DeFi.

In the traditional financial field, this gave rise to the world-famous “Yen Carry Trade”: institutional investors borrow extremely low-cost (almost zero) Japanese yen, convert it into high-yield dollars, and invest in high-interest assets (such as U.S. Treasury bonds), thereby steadily capturing the huge interest rate difference between the two.

However, this operation has traditionally been the preserve of institutions, making it difficult for ordinary investors to participate.The pain point that JPYC solves is to “decentralize” and “permission-free” this professional-level financial strategy.

Under the legal framework of the “1 million yen limit”, JPYC happens to be the perfect tool for DeFi players to perform such arbitrage operations.A typical “on-chain Japanese yen arbitrage trade” path is as follows:

1. Mortgage: A DeFi user deposits his or her ETH or WBTC holdings into decentralized lending protocols such as Aave and Compound as collateral.

2. Lend: The user chooses to lend JPYC.Due to the zero interest rate environment anchored to legal currency, JPYC’s borrowing interest rate (Borrow APY) on the chain is extremely low, much lower than other mainstream assets.

3. Exchange: Users immediately sell the borrowed JPYC on DEX (such as Curve or Uniswap) and exchange it for high-interest USD stablecoins (such as USDC or USDT).

4. Deposit to earn interest: The user then deposits the exchanged USDC into the deposit pool of the lending agreement or an income aggregator (such as Yearn Finance) to obtain a deposit interest (Supply APY) that is significantly higher than the JPYC borrowing cost, thereby capturing the interest rate difference between the two.

This action of “lending JPYC and exchanging it for USDC” is itself a short-selling behavior that is executed on the chain and priced in Japanese yen.JPYC’s redeemability, public chain composability, and upper limit of 1 million yen make it in line with the needs of global DeFi traders to execute such low-to-medium-amount, high-frequency arbitrage.

Pain point three: Japanese yen micropayments within the Web3 ecosystem

In addition, JPYC also serves Japan’s local Web3 ecosystem.For developers of NFT marketplaces, on-chain games or Web3 applications, they need a native Japanese yen payment tool for small settlements.JPYC exactly meets this need for “micropayment” and “in-ecological settlement”.

Progmat: “B2B institutional settlement tool” serving TradFi

Contrary to JPYC, the core users of the Progmat Alliance in Track 2 are not global DeFi traders, but large enterprises, institutional investors, securities companies and banks in Japan and even around the world themselves.

What it wants to solve are systemic “pain points” in Japan’s mainstream financial system that cannot be touched by JPYC.

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 needs to go through a complex chain of “relay banks”.This process not only generates high intermediate costs (handling fees, exchange differences), but more seriously is its extremely poor timeliness (T+N arrival) and non-7x2t hour operation restrictions.

For a global comprehensive trading company like Mitsubishi Corporation, it has massive financial settlement needs around the world every day.Stablecoins based on the Progmat platform provide the first compliant, uncapped, P2P alternative to the three major banks.It allows businesses to make instant transfers directly from one address to another, minimizing intermediate costs.Its core users are the financial departments of multinational companies.

Pain point two (internal): modernization of bank core systems

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

The subtlety of the “bypass” architecture (bank ➡️trust ➡️ blockchain) is that it gives “programmability” to the bank’s deposits (yen) without touching the bank’s core accounting system at all.This is a low-cost, low-risk, high-efficiency banking system modernization solution.

Pain Point 3: “Deposit versus Payment” (DVP Pain Point) in the Security Token Market

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

The cornerstone of financial market settlement is DVP (Delivery versus Payment), which stands for “Deposit versus Payment”.

• Traditional settlement: In the T+2 settlement cycle, there is a huge “credit risk” and “time difference” between the buyer and seller.

• On-chain DVP: The buyer holds the “money” (i.e. Progmat stablecoin) and the seller holds the “asset” (i.e. Progmat security token).Through smart contracts, the two can achieve “simultaneous exchange” (atomic exchange).

This is based on a huge market that already exists.According to Progmat data, as of the fall of 2025, the cumulative issuance amount of domestic ST cases in Japan has reached more than 280 billion yen, and the total market residual value of ST cases has reached more than 560 billion yen (approximately US$3.8 billion).

Of these issued STs, more than 86% in terms of value were immovable STs.

This rapidly growing security token and RWA market, worth hundreds of billions of yen, currently lacks a compliant, efficient, and native “on-chain cash settlement tool.”

Therefore, the core strategic user of the “uncapped” stablecoin jointly issued by the three major banks is this hundreds of billions 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 true strategic intentions of the three major banks

Solving “pain points” is only a superficial “tactical goal”.The deeper questions we really need to answer are:

1. Why “alliance”?Why did Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho, the three giants who are each other’s biggest competitors in the traditional financial field, choose to “jointly” act on this core track?

2. Why “Progmat”?Why don’t banks each build their own private platforms, but choose to entrust this core infrastructure of future finance to a “neutral” entity that is “spin-off” from Mitsubishi UFJ Trust Bank and has dispersed shares?

The answers to these two questions can reveal the real and ultimate strategic intention behind Japan’s top-level financial design.

Intent 1: “Neutral platform” – the only way to build the “greatest common denominator” of the industry

The alliance of Japan’s three major banks is the most thoughtful strategic decision in the entire Progmat stablecoin framework.In the traditional financial world, payment and settlement are the core and most competitive areas of banks.It would be commercially impossible for any bank (such as Mitsubishi UFJ) to try to build a private, exclusive stablecoin settlement platform and require its competitors (such as 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 competitors.

Therefore, the three major banks all realize that in order to build a national-level “institutional settlement network” that can be adopted by the entire industry, the premise must be “neutrality.”

This is the core reason why the Progmat platform was brought to the historical stage.Progmat’s shareholding structure design perfectly illustrates this strategic consideration of “neutrality”.It spun off in 2023 from Mitsubishi UFJ Trust Bank, which remains the largest shareholder (42%) but has its control deliberately diluted.

More importantly, Mizuho Trust, Sumitomo Mitsui Trust, SMBC and even Nongzhong Trust are all tied as its core shareholders with a shareholding ratio of 6.5%.At the same time, the alliance also introduced JPX (Japanese Exchange Group) representing “circulation”, SBI representing “sales” and NTT Data representing “technology”.

The purpose of this “all-star” equity structure is to send a clear signal to the market: Progmat is not the “private property” of Mitsubishi UFJ, but an “industry public infrastructure” jointly funded and recognized by Japan’s financial core forces.

By sacrificing the absolute control of a single organization, Mitsubishi UFJ gained something far more valuable than control – industry-wide adoption and consensus.This is the “price” that must be paid to build a unified “national team” infrastructure, and it is also the only path to its success.

Intent 2: Defense and Counterattack—Building a “TradFi Compliance Moat”

The joint action of the three major banks is not only an offensive to “build a new continent”, but also a crucial “defensive counterattack.”The objects of its defense are global, permissionless cryptocurrencies (such as USDC, USDT) and new players like JPYC.

From the perspective of traditional financial giants, if these “non-sovereign” and “non-bank” stablecoins are allowed to penetrate into the fields of B2B payment and securities settlement, the consequences will be disastrous: the core settlement business of banks will be completely “disintermediated.”

Therefore, the three major banks must take the initiative before the power of Web3 becomes overwhelming.Its strategic logic is the classic “embrace, expand, and incorporate”:

1. hug: Actively embrace blockchain technology and recognize its superiority in DVP and cross-border payments.

2. Expand: Use its most powerful weapons – regulatory trust and legal resources – to promote the revision of the 2023 “Financial Resolution Law” to create an “unlimited” “trust-type” stablecoin legal framework exclusive to banks and trust institutions.

3. Incorporate: Through this “top-level design”, the market was successfully “divided into two”.

   -JPYC: Being permanently “contained” in the DeFi and retail micropayment “sandbox” by the legal framework of the “1 million yen wall”, making it unable to get involved in institutional-level systemic financial services.

   -Progmat: Become the only compliant, unlimited “institutional channel” 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 use the legal framework to ensure that in the foreseeable future, all high-value, systemic financial activities must and can only operate on the “Track 2” under their control.

Intent Three: Monopolize the “Settlement and Toll Station” of the “RWA Economy”

If “neutrality” is its organizational form and “compliance moat” is its defensive means, then its ultimate and core strategic intention is to “offensive” — the “core toll station” that fully controls Japan’s next-generation digital finance.

In the emerging “asset side” of security tokens, the Progmat platform has occupied 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. The first step (asset side): Through the Progmat platform, be the first to monopolize the “asset issuance” of Japan’s ST/RWA (real estate, bonds).

2. Step 2 (cash side): Through the alliance of three major banks, a unified, uncapped Progmat Stablecoin (SC) is issued, becoming the only compliant “cash settlement” tool in this hundreds of billions ST market.

Conclusion: Japan’s “Zone and Build” Digital Asset Strategy

Through the above analysis, we can draw an objective conclusion about the “dual-track system” pattern and future of Japan’s stable currency.In the current market stage, JPYC and Joint Stable are not in a direct competitive relationship, but are parallel tracks serving completely different markets.They serve very different user groups and solve very different market problems.

The Japanese yen stablecoin has entered the stage of “zoning supervision” and “top-level construction”.On the one hand, the regulatory authorities have brought bottom-up Web3 retail innovations such as JPYC into supervision; at the same time, they have set up a “regulatory sandbox” for them.This is like establishing a legal firewall to “isolate” the systemic financial risks that these innovations may bring from the local core financial system.On the other hand, regulators have “top-level designed” a new compliance path for banks and trust institutions, pointing directly at the core of Japan’s financial system: corporate settlement and capital markets.

Looking forward to the next three years, there is a high probability that these two tracks will continue to develop in parallel.Track One will continue to explore innovation in DeFi, Web3 gaming, and retail payments.Track 2 will focus on “securities tokenization” (ST) of Japan’s trillions of dollars’ worth of RWA and its efficient circulation through bank stablecoins (SC).