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.
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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.
Stablecoin adoption by U.S. entities merely shifts existing dollar assets from bank deposits or money market funds. True new demand for the U.S. dollar only materializes when foreign households or corporates convert their local currencies into dollar-backed stablecoins for the first time, creating a net FX conversion.
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.
Despite promising instant, cheap cross-border payments, stablecoins lack features critical for corporate treasurers. The absence of FDIC insurance, a single standard ("singleness of money"), and interoperability between blockchains makes them too risky and fragmented for wholesale use.
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.
Remitly thrives by offering a service that is cheaper and more efficient than traditional players like Western Union, yet remains integrated within the established banking system. This unique position allows it to serve users' needs without triggering the regulatory skepticism faced by decentralized solutions like stablecoins.
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.
Contrary to the popular narrative, the dominant use case for stablecoins in emerging markets is not remittances or savings. Survey data suggests overwhelmingly (88% in one study) that they are used as an entry and exit point for the broader cryptocurrency ecosystem, reframing their role in EM finance.
The high profits enjoyed by stablecoin issuers like Tether and Circle are temporary. Major financial institutions (Visa, JPMorgan) will eventually launch their own stablecoins, not as primary profit centers, but as low-cost tools to acquire and retain customers. This will drive margins down for the entire industry.
