Onigiri Weekend Digest: Institutional Lens #40

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Happy weekend!

This week, stablecoins moved closer to becoming an institutional financial system.

Recap on the two headliners this week:

SS #111 - TradFi Races to Own Stablecoin Reserves

SS #112 - SBI Launches Japan's First Trust-Backed Yen Stablecoin

In the United States, State Street and Fidelity launched money market funds designed specifically for stablecoin reserves, joining a growing field of traditional asset managers competing for issuer mandates.

In Japan, SBI Group launched JPYSC, the country’s first trust bank-backed yen stablecoin, establishing a regulated foundation for yen-denominated onchain settlement.

The two developments sit at opposite ends of the same value chain.

One determines who manages the assets behind stablecoins. The other determines who can issue and distribute regulated digital money.

Together, they reveal where institutional competition is heading: not simply towards launching more tokens, but towards controlling the regulated infrastructure surrounding them.

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🍙 Onigiri Take

The stablecoin market is separating into several distinct institutional businesses:

1. Issuance and distribution

2. Reserve management and custody

3. Compliance and identity

4. Blockchain settlement

5. Liquidity and foreign exchange

6. Redemption and banking access

Traditionally, the largest stablecoin issuers controlled much of this stack themselves or assembled it through a limited number of partners. That model is now being challenged.

State Street and Fidelity are entering through reserve management, where the assets are conservative, the regulatory requirements are clearer and the potential AUM is significant. They do not need to issue a stablecoin to benefit from stablecoin growth. They only need issuers to place their reserves into institutionally managed funds.

SBI is approaching the market from the other direction. By combining a trust bank issuer, a regulated distribution platform and a blockchain-based yen instrument, it is creating a vertically coordinated settlement network.

The strategic battle is therefore no longer limited to which stablecoin achieves the largest circulation.

It is becoming a contest over who owns the institutional relationships, reserve mandates, redemption channels and settlement flows underneath that circulation.

Our view: the next major stablecoin winners may not be the companies with the most visible tokens. They may be the institutions that become indispensable to every token.

🍙 Winners & Losers: Institutional Outlook

🍙 Under the Hood: The Race for the Stablecoin Balance Sheet

State Street and Fidelity are not competing to create more speculative crypto exposure. They are competing to manage highly liquid, short-duration assets supporting digital dollars.

This matters because stablecoin reserves have several attractive characteristics for asset managers:

• They can generate recurring AUM.

• They grow as stablecoin circulation grows.

• They are concentrated in cash, Treasury bills and government-backed repo.

• They require institutional custody, reporting and liquidity management.

• Issuers are unlikely to move reserves frequently once operational integrations are established.

The underlying portfolios may be relatively undifferentiated. Most qualifying products will hold similar short-term government instruments, making it difficult to compete solely through investment performance.

Competition will instead move towards:

• Fees and net yield;

• Liquidity during large redemption periods;

• Custody and banking integration;

• Intraday reporting;

• Tokenised fund shares;

• Automated subscriptions and redemptions;

• Collateral mobility; and

• Connectivity with multiple blockchain networks.

The reserve fund could eventually become more than a passive pool of Treasury bills. It could become a programmable liquidity layer through which stablecoin supply expands and contracts in near real time.

JPYSC represents a parallel development on the issuance side.

Its trust structure provides a clearer legal and institutional foundation than earlier yen-denominated experiments, while the absence of the standard ¥1 million transaction ceiling makes it more relevant for commercial and institutional use.

However, regulatory approval and institutional backing alone will not guarantee adoption.

JPYSC must still develop liquidity, exchange access, corporate integrations and credible use cases. Its initial restriction to SBI VC Trade limits its immediate network reach. Meanwhile, MUFG, SMBC and Mizuho are developing their own joint stablecoin framework, potentially bringing a much larger base of corporate relationships and banking connectivity.

SBI’s first-mover advantage is therefore meaningful but temporary.

Its real objective should be to establish JPYSC as the default yen asset for institutional lending, tokenised securities, onchain foreign exchange and real-world asset settlement before the megabank initiative reaches commercial scale.

The future market may not converge around a single yen stablecoin. Japan could instead develop a multi-issuer system connected through common standards, regulated intermediaries and shared liquidity infrastructure.

🍙Stablecoin ≠ Crypto — It Is a Regulated Balance-Sheet Business

Stablecoins are often evaluated like crypto networks: circulation, transaction count, blockchain activity and exchange liquidity.

Those metrics matter, but they do not fully capture the institutional business being created.

A regulated stablecoin is also:

• A reserve-management mandate;

• A custody relationship;

• A distribution network;

• A redemption obligation;

• A compliance system;

• A liquidity-management operation; and

• A new interface between bank money and blockchain settlement.

This is why traditional financial institutions can enter the market without becoming crypto-native businesses.

State Street and Fidelity can earn economics from stablecoin growth while holding conventional financial assets. SBI can introduce blockchain-based settlement while maintaining issuance within a regulated trust structure.

Neither model depends primarily on crypto-market speculation.

The institutional stablecoin opportunity is increasingly about reconstructing familiar financial functions around programmable money.

That also means differentiation will move away from the token itself.

For reserve managers, the advantage will come from operational integration and liquidity. For banks, it will come from distribution and corporate relationships. For issuers, it will come from acceptance, interoperability and redemption reliability.

A stablecoin may be the product users see, but the defensible business is likely to sit behind it.

🍙 Institutional Risks & Unknowns

Despite the momentum, several risks remain unresolved.

1. Reserve concentration: As issuers place reserves with a small group of global asset managers, the stablecoin industry could develop significant concentration in reserve management, custody and short-term funding markets.

2. Liquidity under stress: Government money market funds are designed for liquidity, but stablecoins can create continuous, high-velocity redemption demands. The interaction between 24/7 blockchain markets and traditional market operating hours remains insufficiently tested.

3. Limited differentiation: GENIUS-compliant reserve funds will hold broadly similar instruments. Fee compression may arrive quickly, forcing providers to compete through integrations and ancillary services rather than portfolio performance.

4. Closed distribution networks: JPYSC’s institutional structure creates credibility, but limited distribution could restrict adoption. Regulated stablecoins must be usable outside their sponsor’s immediate ecosystem to become meaningful settlement assets.

5. Fragmented yen liquidity: Multiple bank-backed yen stablecoins may strengthen competition but divide liquidity. Japan will require common technical, compliance and redemption standards to avoid creating disconnected pools of digital yen.

6. Deposit migration: At scale, stablecoins could move funds from commercial-bank deposits into Treasury-backed reserve vehicles. This may affect bank funding economics and attract closer prudential scrutiny.

Onigiri Capital (onigiri.vc), a US$50 million blockchain-focused investment fund, launched by Saison Capital, the venture arm of Japan’s Credit Saison. Onigiri Capital is on a mission to chart the next chapter of finance and invest in seed and Series A blockchain startups in stablecoins, payments, RWAs, DeFi and financial infrastructure. The fund’s strategy emphasizes connecting startups to Asia’s growing digital asset markets.

If you'd like to discuss or contribute to the next Institutional Lens, contact us at [email protected]

Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.