Japan’s ruling party urges the Ministry of Finance to “open the floodgates for crypto ETFs,” pushing the yen stablecoin to counter U.S. dollar dominance

Japan Officially Enters the Mainstream Cryptocurrency Market!
Reuters today cited the latest report indicating that Japan’s ruling party, the Liberal Democratic Party (LDP), has officially submitted a proposal to the Minister of Finance, strongly recommending that the country establish a legal framework for "cryptocurrency ETFs," allowing investors to participate in the crypto market more easily.
At the same time, the LDP also warned about the monopoly risk of US dollar stablecoins, calling on the government to vigorously promote "Yen stablecoins" to defend national financial sovereignty.
(Background: Japan plans to legislate restrictions on youth social media use, as global regulatory waves continue to spread)
(Additional context: Polymarket reports secretly establishing a presence in Japan, planning to lobby the government to lift the 2030 ban on prediction markets)

Following the US and Hong Kong’s successive approvals of spot cryptocurrency ETFs, Japan, a major traditional financial power in Asia, is also experiencing a historic policy shift.

According to the latest report from Reuters on June 1, 2026, the blockchain technology promotion team under Japan’s ruling Liberal Democratic Party (LDP) has formally submitted a policy recommendation to the Minister of Finance, Satsuki Katayama. The proposal explicitly states that the Japanese government should quickly establish a legal framework to allow cryptocurrency exchange-traded funds (ETFs) and fully expand the application scenarios for Yen stablecoins.

Policy Shift: From "Payment Tool" to "Financial Product"

The LDP blockchain team emphasized in the proposal: "Cryptocurrency ETFs will provide investors with a simple and understandable investment channel." If this regulation is successfully implemented, Japan will officially join the ranks of the US and Hong Kong, allowing mainstream individuals and institutional investors to gain exposure to the crypto market legally without directly purchasing or holding crypto assets.

In fact, Japan’s government already passed a cabinet amendment draft in April this year, reclassifying the legal definition of cryptocurrencies from "payment tools" to "financial products." This critical change in classification is paving the way for the proposed legal framework for crypto ETFs by the LDP.

| Policy Aspects |
| --- | --- | --- |
| Past Japanese Regulatory Stance |
Cryptocurrency law definition |
Classified as "payment tools" (restricting financial derivatives development) |
The cabinet approved the amendment within April, officially upgrading to "financial products" |
| Cryptocurrency ETF Trading |
No relevant compliance framework, institutions cannot participate |
Urging the Ministry of Finance to establish a legal framework to catch up with the US and Hong Kong |
| Stablecoin Promotion Strategy |
Limited to issuance by banks and trust companies, lacking national-level push |
The country should actively promote "Yen stablecoins" to prevent decentralized circumvention of the domestic system |

Countering US Dollar Hegemony! Policymakers Worry About Bypassing the Bank of Japan and Payment Systems

Besides the crypto ETF proposal, another core focus is the strategic position of "Yen stablecoins." Currently, the global stablecoin market size has reached $315 billion, but this vast digital settlement network is almost entirely dominated by dollar-pegged tokens (such as USDT, USDC).

This dollar dominance has triggered collective anxiety among policymakers outside the US. The LDP group pointed out that if the development of Yen stablecoins is not accelerated, the penetration of US dollar stablecoins could completely bypass Japan’s traditional banking and domestic payment systems, thereby weakening the Bank of Japan’s monetary sovereignty. Although several Yen stablecoin projects are currently under development and promotion by private entities, the LDP believes the government must elevate this to a national strategic level for comprehensive support.

Japan’s Ministry of Finance has not yet responded officially to the LDP’s proposal. However, as a core policy of the ruling party, this suggestion is very likely to influence Japan’s next financial legislative direction. As Web3 strategies become a national priority, Tokyo is demonstrating a strong ambition to reclaim its position as Asia’s crypto financial hub.