How to Exchange USDT for Japanese Yen | Complete Guide to Payment Services Act Compliance

Core Principles of USDT Conversion Routes Using Centralized Exchanges

Because USDT (Tether) cannot be directly converted to Japanese yen within Japan, most users combine overseas crypto exchanges with domestic platforms. This approach balances regulatory compliance with practical usability, making it the optimal solution.

The typical conversion process is as follows: exchange USDT for XRP (Ripple) on an overseas exchange, transfer the XRP to a domestic exchange, sell the XRP for Japanese yen, and finally withdraw the yen to your bank account.

This method is widely recommended for several reasons. First, Japan’s major exchanges do not list USDT, so converting to another crypto asset is essential. Second, XRP stands out for its very low transfer fees and fast processing speed. Compared to Bitcoin or Ethereum, this route significantly cuts fees and shortens the settlement time. Additionally, this method enables compliance with Japan’s KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, ensuring a high level of legal safety and reliability.

Routing through a registered domestic exchange clarifies the source and destination of funds, supporting transparency for tax reporting. For these reasons, the “USDT → XRP → Japanese yen” route is established as the most practical and secure method for Japanese residents to convert USDT.

Step-by-Step Guide: Converting USDT to Japanese Yen

This section outlines the specific steps to convert USDT to Japanese yen in clear, beginner-friendly terms. This recommended route offers the best mix of cost efficiency, processing speed, and security.

The standard conversion route is: hold USDT on an overseas exchange → exchange USDT for XRP → transfer XRP to a domestic exchange → sell XRP for Japanese yen → withdraw to your bank account.

Follow these steps:

Step 1: Open a Domestic Exchange Account and Complete Identity Verification Start by opening an account with a major Japanese crypto exchange. You’ll need to submit identification, such as a driver’s license or My Number card. Since verification may take several days, start early if you plan to convert USDT soon.

Step 2: Open an Overseas Exchange Account (If Needed) Depending on where your USDT is held, you may need an overseas exchange account if your USDT is in a non-exchange wallet. Selecting an exchange with Japanese language support can make the process smoother.

Step 3: Deposit USDT to the Overseas Exchange Send USDT from your wallet to the overseas exchange. Double-check the address for accuracy and select the correct network (such as ERC-20 or TRC-20). For your first transfer, test with a small amount to ensure successful delivery before sending the full amount.

Step 4: Exchange USDT for XRP on the Overseas Exchange On the spot trading screen, select the “XRP/USDT” pair and buy XRP with your USDT. Market orders are simplest, but you can use limit orders to buy at your preferred price.

Step 5: Transfer XRP from the Overseas Exchange to the Domestic Exchange Send your purchased XRP to your domestic exchange’s XRP deposit address. Some exchanges require a “destination tag,” so enter it precisely as instructed.

Step 6: Sell XRP on the Domestic Exchange (Convert to Yen) Once XRP arrives, sell it to convert to Japanese yen. You can sell at the market price for immediate settlement or set a limit order at your preferred price.

Step 7: Withdraw Japanese Yen to Your Bank Account Withdraw the yen from your exchange account to your registered bank account. Since withdrawal fees vary by exchange, check this in advance.

By following these steps, you can efficiently convert USDT to Japanese yen. Completing account setup and verification in advance ensures a smooth conversion process.

How to Exchange USDT for XRP on Overseas Exchanges

Converting USDT to XRP via an overseas crypto exchange is the central step in this process. Here, we cover the reasons for this exchange, step-by-step instructions, and fee considerations.

Why Exchange USDT for XRP?

Due to Japan’s Payment Services Act, domestic exchanges do not support USDT. As a result, you must convert USDT into a crypto asset supported domestically. XRP is widely supported, offers low transfer costs, and fast processing, making it the ideal bridge asset.

Choosing an Overseas Exchange

When selecting an overseas exchange, look for Japanese language support, high liquidity, and strong security. Major exchanges offer broadly similar trading workflows, so choose the platform that best fits your needs.

Step 1: Deposit USDT to the Overseas Exchange (If Held in a Wallet)

If your USDT is in a wallet, deposit it into your overseas exchange account. Carefully copy the deposit address and paste it into your wallet’s transfer screen. An incorrect address—even by one character—can result in lost funds, so double-check. Also, ensure you select the network (ERC-20, TRC-20, etc.) that matches the deposit address.

For your first transfer, send a small test amount (e.g., 10 USDT) to confirm delivery before transferring the full balance. This helps prevent losses from address or network selection mistakes.

To minimize gas fees, if USDT supports multiple blockchains, choose the one with the lowest fees. Since Ethereum (ERC-20) fees can be high, consider Tron (TRC-20) or Binance Smart Chain (BEP-20) if available.

Step 2: Exchange USDT for XRP

Once the USDT arrives in your overseas account, exchange it for XRP. Access the spot trading screen, search for the “XRP/USDT” pair, and enter the amount you wish to convert. Market orders are immediate; limit orders let you specify your price, but may take longer to fill.

After the trade, your USDT balance decreases and XRP is credited to your account. Always verify the XRP amount received. There are two main types of fees: trading fees and spreads.

Fees Incurred During Exchange

Trading fees usually run about 0.1% (subject to VIP levels). For 1,000 USDT, you’ll pay about 1 USDT in fees. The spread (difference between buy and sell prices) is also a factor, but XRP/USDT is highly liquid, so spreads are typically small.

Alternatives to XRP

While XRP is the most commonly used bridge asset, Litecoin (LTC) and Stellar Lumens (XLM) are also options, offering low fees and broad support on Japanese exchanges.

However, XRP’s widespread support and high liquidity make it the safest option for most users, especially beginners. Its rapid transfer speed—settlement in seconds to minutes—also helps accelerate the conversion process.

USDT Conversion Using Decentralized Finance (DeFi)

Beyond centralized exchanges, you can use wallets and decentralized exchanges (DEX) to convert USDT. This method requires more technical knowledge and experience but appeals to users who want to minimize dependence on centralized platforms.

Swapping Directly from a Wallet

If you hold USDT in a Web3 wallet (like MetaMask or Trust Wallet), you can use leading DEXs to swap USDT for other cryptocurrencies—such as exchanging USDT for ETH on the Ethereum network.

DEXs enable direct asset swaps through smart contracts, so you retain self-custody of your funds and don’t need to deposit assets with an exchange.

Swapping for a Currency Supported by Domestic Exchanges

The asset you swap for must be supported by Japanese exchanges. On Ethereum, this typically means ETH or major ERC-20 tokens; on Binance Smart Chain, BEP-20 tokens are suitable options.

However, since XRP uses its own blockchain, you can’t acquire it directly via Ethereum-based DEXs. In DeFi workflows, swapping to ETH or BTC (wrapped BTC) is more practical.

Transferring to a Domestic Exchange and Converting to Yen

After swapping USDT for ETH or BTC on a DEX, send the new asset to your domestic exchange account. From there, sell for Japanese yen and withdraw to your bank—just as with the centralized method.

At first glance, this process may seem similar to centralized exchange workflows, but DeFi comes with its own important caveats and risks.

Key Considerations When Using DeFi

First, you will incur gas (network) fees for swaps and transfers. On Ethereum, these can reach tens of dollars during periods of congestion and apply regardless of transaction size—making small conversions expensive.

Second, there’s slippage risk: in low-liquidity or large trades, the execution rate may be worse than quoted. To mitigate this, split large swaps into smaller transactions.

Additionally, operational errors—such as incorrect wallet addresses or network selection—carry a real risk of funds loss, and there is no customer support as with centralized platforms. Recovery is extremely difficult in case of mistakes.

Finally, DeFi alone cannot complete the conversion to Japanese yen. After swapping, you still need to use a domestic exchange, so DeFi doesn’t necessarily simplify the process.

Strategies for Cost Optimization

Here are a few strategies to minimize costs when converting USDT via DeFi:

First, choose your domestic exchange carefully. Withdrawal fees for Japanese yen can vary dramatically, with some exchanges offering free or low-cost withdrawals—potentially saving hundreds or even thousands of yen over time.

Second, select a cost-effective transfer network. When sending USDT to overseas exchanges, use a network with lower fees (TRC-20, BEP-20, etc.). If you only have ERC-20 USDT, consider using a bridge to switch networks—though this may involve extra fees and risks.

Also, decide whether to transfer all funds at once or split into multiple transfers. Sending everything at once incurs only a single fee, but carries more risk if a mistake occurs. If in doubt, try a small test transfer first to ensure successful delivery.

Don’t forget to check exchange rates. While USDT is dollar-pegged, the USD/JPY rate will affect your conversion. For large conversions, monitor the rate on your transaction day and consider splitting the conversion to manage risk.

Finally, watch for exchange campaigns: some platforms periodically offer free withdrawals or reduced spreads. Coordinating your conversion with these campaigns can lead to unexpected savings. Check official websites and app notifications regularly.

Factoring in these points, you can safely and efficiently convert USDT to Japanese yen while minimizing unnecessary costs.

Why USDT Is Not Supported in Japan: Regulatory Background

To date, Japan’s major crypto exchanges do not list or support USDT (Tether). In contrast, USDC (USD Coin)—another dollar-pegged stablecoin—has been listed by some domestic exchanges, with more planning to follow suit.

This difference stems mainly from Japan’s regulatory framework, particularly the Payment Services Act.

Stablecoin Regulation under the Payment Services Act

Recent amendments to the Payment Services Act define stablecoins as “electronic payment instruments,” allowing banks, trust companies, and money transfer operators to issue and circulate stablecoins under certain conditions. Circulating overseas-issued stablecoins in Japan, however, requires additional registration procedures.

Before these amendments, there was no legal framework for fiat-pegged digital currencies, effectively restricting their handling by exchanges. For USDT, longstanding concerns about insufficient disclosure of backing assets have also prevented domestic listings.

Specifically, USDT’s issuer claims to hold US dollar reserves equivalent to issued tokens, but the details and audit reports are only partially disclosed. Japanese regulators, prioritizing consumer protection, view this lack of transparency as a problem and remain cautious about allowing USDT domestically.

Global Regulatory Developments

Globally, regulatory scrutiny of USDT is tightening. The EU’s Markets in Crypto-Assets (MiCA) regulation has prompted several major exchanges to delist USDT, requiring stablecoin issuers to maintain strict transparency and reserve management (see details).

In the US, pending legislation may soon require stablecoin issuers to maintain robust reserves and regular reporting. These global trends influence Japanese policy decisions as well.

As a result, Japanese exchanges remain unable to support USDT, so users cannot directly convert USDT to yen. The workaround—exchanging USDT for XRP or another crypto on an overseas exchange, then converting to yen domestically—remains the practical standard.

Should USDT improve transparency and meet Japanese regulatory requirements, domestic support may become possible. Until then, the methods in this article remain the most practical approach.

Travel Rule Compliance and USDT Transfer Regulations

An important regulation affecting USDT conversion is the “Travel Rule,” which aims to increase transparency in crypto transfers and combat money laundering and terrorist financing.

Travel Rule Basics

The Travel Rule is an international anti-money laundering standard requiring crypto service providers to share sender and recipient information for transfers. Established by the FATF, it is being adopted worldwide.

In Japan, recent regulations mandate that domestic crypto exchanges use travel rule-compliant networks for transfers between themselves. Specifically, exchanges must share sender and recipient names, addresses, and account numbers during transfers.

Transfer Restrictions Between Domestic Exchanges

If exchanges use incompatible information-sharing systems, direct transfers may be blocked. For example, if one exchange uses System A and another uses System B, transfers may be impossible due to incompatibility.

These restrictions can confuse users—especially first-timers—who may not understand why their transfers fail.

Transfers via Overseas Exchanges and Personal Wallets

This restriction applies only to transfers between registered domestic operators. Transfers via overseas exchanges or self-custody wallets are currently unaffected.

For example, when sending from an overseas exchange to a domestic exchange, the travel rule does not apply, and transfers can proceed as usual. Overseas exchanges are not subject to Japanese registration and thus are outside the scope of this regulation.

However, future regulatory changes may extend these requirements to cross-border transfers, so it’s important to keep up with the latest developments.

Practical Tips for Users

When transferring between domestic exchanges, verify that the recipient address belongs to a registered operator. If the recipient exchange uses an incompatible travel rule system, your transfer may be blocked.

If blocked, you can send funds to your personal wallet first, then forward them to the desired exchange. While this bypasses the travel rule, it incurs additional transfer fees.

The USDT conversion method described here—“overseas exchange (non-registered) → domestic exchange (registered)”—is currently not restricted by the travel rule. Still, as regulations constantly evolve, understanding these mechanisms is essential.

Be sure to complete KYC verification at domestic exchanges. Since the travel rule strengthens identity checks, incomplete verification may eventually block transfers or withdrawals.

Summary: Practicing Safe and Efficient USDT Conversion

The most practical way to convert USDT to Japanese yen is to exchange USDT for XRP on an overseas exchange, then convert it to yen via a domestic exchange. This leverages XRP’s fast settlement and low fees for excellent cost performance.

By using a registered domestic exchange as an intermediary, you can comply with Japan’s Payment Services Act and AML regulations, minimizing legal risks while ensuring reliable yen conversion.

DeFi-based methods are also available, but due to high gas fees and operational complexity, they are best suited for intermediate or advanced users. Beginners should start with centralized exchanges as described here.

Understanding Japan’s regulatory environment and basic conversion routes before starting will help you avoid issues and ensure a smooth, trouble-free conversion. Advance preparation and careful execution are the keys to safe, efficient USDT conversion.

FAQ

What is USDT? Can I convert it to Japanese yen?

USDT is a stablecoin issued by Tether, pegged to the US dollar for price stability. It can be converted to Japanese yen, and many exchanges support this service.

What are the specific steps to convert USDT to yen?

Exchange USDT for BTC or ETH on an overseas exchange, transfer to a domestic exchange, and then convert to yen. If a domestic exchange directly supports USDT, you can convert to yen there.

What are the fees and exchange rates for USDT conversion?

Fees vary by platform and method, generally ranging from 0.1–1%. Exchange rates reflect current market prices and can be checked in real time. Refer to official platform sources for details.

Are there legal exchanges in Japan to convert USDT to yen?

Japanese exchanges do not directly support USDT. The standard method is to sell USDT via an overseas exchange, then transfer the proceeds to your Japanese bank account.

What are the tax rules for converting USDT to yen?

When you convert USDT to yen, you must report it for tax purposes. Taxes are calculated based on the conversion amount, and failure to report may result in penalties. Accurate tax reporting is essential.

What are the security risks and countermeasures when converting USDT?

The main risk is sending funds to the wrong address. Double-check addresses and use small test transfers to minimize risk. Enable two-factor authentication and use reputable platforms for added security.

What is a safe conversion method compliant with the Payment Services Act?

Use a registered money transfer provider and take advantage of direct reimbursement protection by banks. The 2025 Payment Services Act revision introduced a new protection system for faster fund returns without relying on deposits. Stablecoin transactions should also be conducted through registered providers.