TOKYO — Japan's Financial Services Agency submitted its fiscal 2027 tax reform request to the government on Aug. 31, asking for a blanket exemption from filing requirements that currently attach to trust-based stablecoins with every transfer.
The friction point is Japan's inheritance tax law. Trustees must submit trust-related documents to tax authorities each time the beneficiary of a trust changes. For standard trust assets, that rule is manageable. For a stablecoin built on a trust structure, where the beneficiary shifts with every single transfer, the requirement becomes operationally impossible—trustees cannot identify holders by name or track each change in real time across an active payment network.
The FSA placed the proposal in the "promotion of financial innovation" section of its tax reform request, signaling the agency views the current rule as a structural obstacle, not a minor administrative burden.
Japan classifies fiat-backed stablecoins as "electronic payment instruments" under its Payment Services Act. Trust-based stablecoins fall under the third category of electronic payment instruments within that classification. The FSA is asking that beneficiary changes involving this third category be removed entirely from the scope of the filing requirement.
JPYSC, a yen-denominated stablecoin issued by SBI Shinsei Trust Bank, exemplifies the problem. Every transfer technically triggers the filing obligation under current rules—a compliance burden incompatible with high-frequency payment use cases the token is designed to serve.
For SBI Shinsei Trust Bank and any other institution building on the trust-based stablecoin structure, the filing requirement creates direct operational cost. Every transfer generates a potential compliance event. At scale, that is not a paperwork problem—it is a product design constraint that limits transaction throughput and discourages use in everyday payment rails.
The FSA also flagged a separate issue in the same reform package: trust-based stablecoins issued outside Japan. That cross-border dimension adds jurisdictional complexity around who bears the filing obligation and under which country's rules. The agency did not publish a detailed proposal for the overseas-issued token question on Aug. 31. The government and the ruling Liberal Democratic Party will take it up later this year as part of the standard year-end tax reform process.
Japan's year-end tax plan is the mechanism that converts FSA requests into binding law. The Aug. 31 release is a formal demand document, not a final rule. The government and ruling party will evaluate it alongside other fiscal 2027 priorities before the plan is finalized, typically in December. If the exemption survives that process, it takes effect in the fiscal year starting April 2027.
The regulatory architecture around stablecoins in Japan has advanced steadily since 2022, when the country amended its Payment Services Act to create a legal pathway for stablecoin issuance—one of the first major economies to do so. The trust-based category sits alongside two other permitted structures: stablecoins issued by banks and those issued by licensed fund transfer operators. Each carries different rules, and the tax treatment has not kept pace with the operational realities of each structure.
The FSA's move targets the tax reporting burden, not the issuance or reserve requirements that govern how stablecoins are backed. Those rules remain under the Payment Services Act framework already in place. What the agency is trying to strip out is a legacy inheritance-law mechanism designed for static trust arrangements—estates, family trusts, asset management vehicles—that now sits awkwardly on top of a payment instrument meant to move freely.
