Japan's framework, requiring 100% backing by liquid assets and banning algorithmic stablecoins, is intentionally strict. This approach aims to build institutional trust and position its yen stablecoin as a highly reliable and secure digital asset on the global stage, contrasting with less-regulated cryptocurrencies.

Despite being a latecomer, Japan's regulatory framework is setting a global precedent. Its strict requirements—such as 100% backing by high-quality liquid assets and a ban on algorithmic stablecoins—are being mirrored by other major financial centers, positioning Japan's model as the new standard for trust and stability.

The recent explosion of stablecoins wasn't due to a new financial innovation, but the maturation of underlying blockchain infrastructure. Cheaper and faster transactions on Layer 2 solutions and improved Layer 1s finally made large-scale, low-cost payments practical for real-world use.

Instead of funding another stablecoin protocol, the more viable investment is in the tooling layer. This includes payment systems, SDKs, and accounting software (like triple-entry bookkeeping) that enable small businesses globally to integrate stablecoin payments into their existing fiat workflows.

Instead of disrupting the established SWIFT network, Japan's stablecoins are positioned to work alongside it. They offer a parallel system for faster, cheaper transactions, potentially reducing fees by up to 80%, while leveraging SWIFT's existing trust and compliance frameworks for broader adoption.

For stablecoin companies like Tether seeking legitimacy in the US market, the simplest path is to back their assets with US treasuries. This aligns their interests with the US government, turning a potential adversary into a welcome buyer of national debt, even if it means lower returns compared to riskier assets.

While stablecoins gain attention, tokenized deposits offer similar benefits—like on-chain transactions—but operate within the existing, trusted regulatory banking framework. As they are simply bank liabilities on a blockchain, they may become a more palatable alternative for corporates seeking efficiency without regulatory uncertainty.

Beyond simple consumer payments, the most significant impact of Japan's stablecoins will be on its financial market infrastructure. By enabling real-time settlement for securities like stocks and bonds—a process that currently takes days—stablecoins can dramatically increase efficiency and reduce counterparty risk.

Japan's approach is not an "either/or" choice between CBDCs and private stablecoins. It views a potential government-issued CBDC as the foundational public infrastructure upon which private companies can build innovative stablecoin-based financial products and services, fostering a dual-track digital economy.