Japan is one of the leaders in regulated stablecoins. New legislation that came into force in June 2023 allows for three types of stablecoins.

Banks are allowed to issue stablecoins backed by deposits. And in Japan, there is 100% deposit insurance in certain circumstances. That includes Yen deposits for payment purposes that don't carry interest. However, bank issued stablecoins can only be circulated amongst KYC'd entities.

Legislation also supports trust bank issued stablecoins, which don't require KYC'd end users. Trust banks can issue digital currencies for third parties, including in foreign currencies. However, given deposits are likely to be interest bearing, they won't be fully covered by deposit insurance.