Key Takeaways:

• Japan’s ruling party wants to create a legal framework for crypto ETFs and expand the use of yen-backed stablecoins.
• The proposal aims to make crypto investing easier through traditional brokerage accounts and regulated investment products.
• Japan is promoting yen-backed stablecoins for Asian payments as it seeks to reduce reliance on US dollar-backed tokens.

Japan’s ruling Liberal Democratic Party (LDP) submitted a formal proposal to the government on 1 June 2026, calling for a legal framework for cryptocurrency exchange-traded funds (ETFs) and wider use of yen-backed stablecoins across Asia.

The LDP’s Parliamentary Association for the Promotion of Blockchain — a lawmaker group focused on digital finance policy — presented the document to Finance Minister Satsuki Katayama, who also oversees Japan’s Financial Services Agency (FSA), the country’s main financial regulatory agency.

Japan is pushing to make crypto investing more accessible

The proposal argued that crypto ETFs would give investors a regulated and easy-to-understand entry point into digital assets while encouraging the government to formally recognize them as investment products.

Adopting crypto ETFs would place Japan alongside the US and Hong Kong, both of which already offer crypto ETF products. The proposal also recommended gradually increasing the leverage (borrowed funds) limit for crypto derivatives trading by individual investors, which is currently capped at two times an investor’s funds, while strengthening enforcement against unlicensed crypto operators.

The recommendations arrived roughly two months after Japan’s cabinet approved plans to reclassify cryptocurrencies as investment-focused financial products rather than payment tools. Finance Minister Katayama reportedly acknowledged the need to keep pace with international developments, pointing to the growing momentum behind crypto regulation in the United States.

Learn More: What Are Stablecoins, and How Do They Work?

Yen stablecoins as a tool for regional financial influence

Alongside ETFs, the proposal called on the government to promote yen-backed stablecoins for cross-border payments and settlements across Asia. LDP lawmaker Junichi Kanda, who helped draft the recommendations, told reporters after meeting Katayama that the government must take concrete steps to push yen stablecoins in Asian payments going forward.

The challenge is significant, as yen-denominated stablecoins remain a tiny part of the market, accounting for less than 0.01% of the market capitalization of US dollar-backed stablecoins, according to an April 2026 address by Pablo Hernández de Cos, general manager of the Bank for International Settlements, at a Bank of Japan seminar. The global stablecoin market is currently worth around $320 billion.

Dollar-backed tokens like Tether’s USDt (USDT) and USDC (USDC) dominate the market, and Japanese policymakers have warned that their growing use could shift financial activity away from regulated domestic banking systems. Japan plans to display its stablecoin and blockchain progress at the Asian Development Bank’s annual meeting in Aichi-Nagoya in May 2027.

Related: Japan Opens the Door for Global Stablecoins Starting June

Japan had already opened its doors to foreign stablecoins

The proposal builds on regulatory changes already underway. In May 2026, Japan’s FSA introduced rules allowing eligible foreign-issued stablecoins to operate in the country as regulated electronic payment instruments under the Payment Services Act, effective 1 June 2026. Only trust-type stablecoins (where reserves are held and managed by licensed trust institutions) qualify if they meet strict reserve management, auditing, and Anti-Money Laundering requirements.

At the same time, Japan’s three largest banks are running an FSA-backed joint stablecoin experiment, while domestic startup JPYC has been issuing yen-pegged stablecoins since October 2025.

For regular investors and traders, a crypto ETF framework would allow access to digital assets through familiar brokerage accounts, removing the need to manage crypto wallets or private keys. Broader yen stablecoin adoption could also lower transaction costs and speed up cross-border payments across Asia.