The Current State of Digital Currencies ～The Latest Trends in Stablecoins and Tokenized Deposits～ | Insights

Digital currencies, which are issued and circulated on blockchains and primarily used for payments, are expanding globally. What exactly are digital currencies, what can they be used for, and will adoption continue to grow? This article examines these questions by focusing on two types of digital currencies: stablecoins and tokenized deposits.
(This article has been reconstructed and published based on content that appeared in the March 2026 issue of Monthly Financial Journal.)

About the Author

Yusuke Uchida

Senior Manager

Intensifying Competition Over “Monetary Sovereignty”

In the United States, the Trump administration signed the GENIUS Act into law in July 2025. The intent appears to be to clarify the legal status of stablecoins within the United States, promote their sound development, and expand the international use of U.S. dollar-denominated stablecoins, thereby maintaining the dollar’s position as a key currency.

In Europe, the European Central Bank announced in October 2025 that the preparation phase for the “digital euro” had been completed and that the project would move into the next phase. Legal frameworks may be established in 2026, with issuance potentially occurring in 2029. There are concerns that a rapid influx of U.S. dollar-denominated stablecoins into Europe could undermine the euro’s monetary sovereignty.

Elsewhere, the United Kingdom is advancing the sophistication of the pound through proof-of-concept experiments with GBTD^*1. In China, the digital yuan is already in pilot operation, and pilot areas are expected to continue expanding with objectives such as de-dollarization. In this way, competition over monetary sovereignty in the digital realm is unfolding rapidly on a global scale. These developments will also have implications for the Japanese government and companies.

*1 GBTD (Great British Tokenised Deposit): Pound-denominated tokenized deposits led by UK Finance.

An Era of Digital Value Transfer

What exactly is a digital currency? Generally, the term refers to value that is electronically recorded and transferred, and it is used to describe various forms such as electronic money, crypto-assets, and central bank digital currencies (CBDCs). In this article, however, from the perspective of implementation as payment infrastructure and institutional design, digital currencies are defined as “payment instruments that transfer value on a blockchain and are linked to legal tender.” Under this definition, existing payment instruments such as electronic money are not considered digital currencies because they do not transfer value on a blockchain. Crypto-assets are also excluded because they are not linked to legal tender. What remains are stablecoins, tokenized deposits, and CBDCs, but this article focuses in particular on stablecoins and tokenized deposits led by the private sector.

It is often said that while Web2 represented the “Internet of information,” Web3, which leverages blockchain technology, represents the “Internet of value.” By using blockchains with built-in tamper resistance as a foundation, this approach enables not only the transfer of information but also the transfer of value in the digital domain.

“Fast,” “Low-Cost,” and “Smart” Payment Instruments

What advantages do digital currencies offer compared to conventional payment instruments? Based on commonly cited perspectives and domestic case studies, we examine several hypotheses.

First is speed, namely the immediate transfer of value. By transferring value on a blockchain rather than through bank core systems or the Zengin System, use cases such as real-time cross-border remittances operating 24 hours a day, 365 days a year can be realized. Although this has been considered for a long time, multiple projects such as Project Agorá, Project Pax, and Partior are currently being advanced.

Second is cost, namely the elimination of intermediaries. This reflects an end-to-end value transfer concept such as A2A payments^*2. Shinoken, a real estate company, has partnered with Japan Post Bank to launch a proof-of-concept experiment for rent collection using DCJPY from DeCurret DCP starting in November 2025. By debiting funds directly from Japan Post Bank without involving payment service providers that currently participate in rent withdrawals, the initiative aims to reduce payment fees and enable earlier detection of unpaid rent.

Third is intelligence, namely programmability. Digital currencies are money with logic embedded, enabling automatic value transfers based on predefined conditions. In August 2025, Sumitomo Mitsui Banking Corporation and others launched a project to use stablecoins for DvP settlement^*3 in the secondary market for digital securities, with the aim of eliminating counterparty credit risk. In addition, SBI Shinsei Bank and others began a proof-of-concept experiment for DvP settlement using tokenized deposits in December 2025.

However, these features do not hold unconditionally. Even if value transfers on tokens become faster, the overall effect will be limited if pre- and post-processing such as AML (anti-money laundering) remains slow. In addition, comprehensive verification of return on investment is required, taking into account initial build costs and other factors.

*2 A2A (Account to Account): Direct transfer of funds from bank account to bank account without intermediaries.
*3 DvP (Delivery Versus Payment): Simultaneous processing of securities delivery and payment (atomic settlement).

Differences Between Stablecoins and Tokenized Deposits

Digital currencies include stablecoins and tokenized deposits, but what distinguishes the two? Stablecoins are positioned as electronic payment instruments under the Payment Services Act, and are broadly categorized into three types: Type 1 stablecoins issued by funds transfer service providers^*4, Type 3 stablecoins issued by trust banks and similar institutions, and foreign stablecoins such as USDC that are circulated domestically. Stablecoins can be transferred to anonymous recipients or individuals without bank accounts, giving them a fundamentally broader circulation scope than tokenized deposits.

Type 1 stablecoins are issued by funds transfer service providers. In October 2025, JPYC, a Type II funds transfer service provider, issued Japan’s first domestic stablecoin. With issuance and redemption capped at JPY 1 million per day, it is currently designed primarily for individual users rather than corporate use.

Type 3 stablecoins^*5 involve business companies or banks acting as settlors who entrust funds to trustees such as trust banks, with stablecoins issued and circulated as beneficiary interests. The issuer is a trust bank or similar institution, and the settlor does not require a license. At present, Type 3 stablecoins have not been commercialized, but at the proof-of-concept stage, examples include adoption by the Financial Services Agency’s PIP^*6 in November 2025 involving the three megabanks and others. Type 3 stablecoins are trust beneficiary rights and differ from cash and deposits. Accordingly, when using Type 3 stablecoins for intercompany settlements, for example, accounting and operational impacts should be carefully reviewed.

Foreign stablecoins are stablecoins such as USDC that are issued under foreign laws and circulated domestically. Because they are issued by foreign companies, electronic payment instrument transaction service providers^*7 that act as intermediaries for stablecoins are required, primarily from the perspective of user protection, to implement asset preservation measures such as performance guarantee deposit contracts.

Tokenized deposits are tokenized bank deposits, and in current domestic cases, they are treated as settlement deposits and thus fully covered by the deposit insurance system. In April 2024, Hokuriku Bank commercialized them as a regional currency, and in August of the same year, GMO Aozora Net Bank commercialized their use for non-fossil certificate transactions using DCJPY from DeCurret DCP. Subsequently, related reports and press releases followed, including involvement by Japan Post Bank and SBI Shinsei Bank in September 2025, and by Higo Bank and Kagoshima Bank in December 2025.

From the perspective of banks and similar institutions, stablecoins raise concerns about deposit outflows. Tokenized deposits, however, allow deposits to be put on-chain while remaining on the balance sheets of banks and similar institutions, enabling continued use of deposits. From the perspective of business companies and individuals using tokenized deposits, they are easier to handle operationally because they are deposits. In particular, for global use such as cross-border remittances, they are easier to accommodate within existing legal and operational frameworks that have been organized around bank deposits, and regulators also find them easier to address as extensions of existing systems.

On the other hand, tokenized deposits require connectivity with bank core systems, making the reduction of associated modification costs a key issue. In addition, tokenized deposits currently cannot circulate across issuing banks, making multi-bank interoperability an important theme.

Domestic examples of tokenized deposits to date have used settlement deposits and are non-interest-bearing, but there is potential for interest-bearing designs in the future by structuring them as ordinary deposits. Stablecoins, by contrast, are generally not designed to bear interest, so those seeking yield would need to consider combinations with instruments such as tokenized money market funds.

*4 There are currently no Type 1 stablecoins issued by deposit-taking financial institutions. Careful consideration is required by the Financial System Council.
*5 Type 2 stablecoins are intended for diversion prevention and do not currently exist.
*6 Financial Services Agency FinTech Proof-of-Concept Hub / Payment Innovation Project (PIP: Payment Innovation Project).
*7 As of January 2026, SBI VC Trade is the only electronic payment instrument transaction service provider.

Key Consideration Points for Financial Institutions

Digital currencies have moved beyond the stages of institutional design and proof-of-concept and are entering a phase of practical use. Finally, from the perspective of financial institutions that may become issuers of digital currencies, we would like to review the key points for consideration regarding how to view the business opportunities and competitive impacts brought about by digital currencies, and what decisions are required.

First is visioning. As digital currencies permeate corporate and individual use, a portion of bank deposits will move on-chain. While this could affect funding structures, it also represents an opportunity to incorporate stablecoins and tokenized deposits into proprietary services. It is essential to design a vision of the business environment and the institution’s role five years from now, and then, through backcasting, carefully examine use cases such as “for whom” and “what kind of value to provide.”

Second is the construction of a business model. The initial question is whether digital currency is truly necessary, and if issuing one, whether to choose stablecoins or tokenized deposits. Other considerations include circulation scope, transaction volume, alliance strategies, and monetization models.

Third is the establishment of an operational framework. This includes sales, accounting, tax, and legal functions, but the compliance perspective is particularly critical. AML measures such as know-your-customer procedures, the travel rule, and self-custody wallets are essential. Especially for stablecoins, where circulation including anonymous recipients without completed KYC is anticipated, meticulous AML design is indispensable.

Fourth is system development and operational governance. Implementing digital currencies involves many technical and operational issues, including connectivity with core systems, key management, smart contract audits, performance, and business continuity planning and availability. Given that third-party collaboration is a prerequisite, requirements for vendor management and cyber resilience will become even more stringent.

Based on these considerations, responding to digital currencies must be viewed as a comprehensive theme that will shape the future of financial institutions. In doing so, it is important to pursue an approach that combines long-term vision with phased implementation and ongoing verification.

Toward the Business Utilization of Digital Currencies

This insight has examined the “current state of digital currencies.” The social implementation of token economies is advancing rapidly and accelerating irreversibly. Just as financial institutions have been required over the past 30 years to shift their business from face-to-face to online with the advent of the Internet and smartphones, there is a high likelihood that they will be required to shift from Web2 to Web3 going forward. Risk scenarios surrounding financial institutions, such as deposit outflows from regions or economic zones, are entirely plausible, making proactive responses essential.

ABeam Consulting provides a wide range of support, including trend analysis on digital currencies, legal structuring, business model assessment, operational and system development, and project management, drawing on its expertise and track record in finance and advanced technologies. ABeam Consulting also participates in the “interbank settlement using tokenized deposits” initiative, which has been selected as a support project under the Financial Services Agency’s FinTech Proof-of-Concept Hub PIP. Those who are interested are encouraged to contact us.

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