Background and Purpose
The Financial Services Agency commissioned Deloitte Touche Tohmatsu Consulting to conduct a research study aimed at understanding the actual situation of stablecoins for their sound development, as their market presence continues to grow. Stablecoins offer advantages of avoiding the price volatility risks associated with traditional crypto assets and enabling fast, low-cost remittances and settlements, with a market capitalization exceeding $210 billion.
Key Research Contents
Expansion of Payment-Related Use Cases
- Progress in adoption for various purposes beyond crypto asset trading settlements, including international remittances, B2B cross-border transactions, digital payments, and e-commerce
- Utilized as a means of value exchange replacing existing banking networks in regions with low bank account ownership rates or high domestic currency inflation
Countermeasures Against Illicit Use and Challenges
- Analysis of sanctioned entities' transactions revealed relatively high usage rates of stablecoins
- While countermeasures such as blacklist functions by issuers are being implemented, there are limitations to issuers acting alone, requiring collaboration with analysis tool vendors and authorities
- Sophistication of illicit use methods including mixing (concealing theft routes) and chain hopping (movement between multiple chains)
Progress in Technical Countermeasures
- Stablecoin issuers: Expanding blacklist functions to Layer 2 blockchains
- Analysis tool vendors: Pattern analysis utilizing machine learning
- Wallet providers: Providing alert functions for prevention
Future Outlook
The following initiatives are considered important for stablecoins to soundly create new opportunities:
- Strengthening real-time fraud countermeasures
- Clarification of universally recognized fraudulent activities
- Building continuous cooperation systems among stakeholders
- Improving regulatory environment and incentive design
This research is scheduled to be disseminated at international conferences as a guide to maximizing the new opportunities brought by stablecoins while showing directions for countermeasures against potential risks.
Impressions
This report represents an important analysis in the process of financial systems evolving from mobile payments to new digital tools such as stablecoins. Particularly noteworthy is that stablecoins are rapidly spreading not as mere speculative assets but as actual payment methods.
The use cases in regions without bank accounts or suffering from high inflation are very interesting from a financial inclusion perspective, showing the potential to complement the limitations of traditional financial systems. On the other hand, countermeasures against illicit use have become an urgent issue, and there is a clear need to proceed with both technical countermeasures and regulatory environment development.
As the use of stablecoins is expected to expand in Japan, the insights presented in this report will serve as valuable guidance for all stakeholders including regulatory authorities, financial institutions, and fintech companies. In particular, the emphasis on the importance of understanding the actual situation from a global perspective and building risk management systems provides important implications for future policy formation.