Japan lets its banks and other entities issue stablecoins
Wants private coins to have face value in Yen by 2023
Japan's parliament has passed legislation allowing Yen-linked stablecoin cryptocurrencies, thus becoming one of the first countries – and by far the largest economy – to regulate a form of non-fiat digital money.
The regulations stipulate that only banks and other registered financial institutions – like money transfer agents and trust companies – can issue the alterna-cash. Intermediaries, or those who are responsible for the circulation of the currencies, will be required to adopt stricter anti-money-laundering measures. The rules also define stablecoins as digital money and guarantee face value redemption.
Japan's Financial Services Agency (FSA) floated this regime in a March 2021 proposal. Parliamentary assent for the proposal means it will come into effect in 2023. The regulations will apply to domestic financial institutions as well as foreign operations that target Japanese users. The research material supporting the decision relied heavily on trends in the US and Europe.
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On the same day as the decision, the FSA published a document that considers global use of stablecoins and advocates for their use in Japan – with appropriate regulation.
Within the US, the FSA noted, stablecoins are not regulated but those who handle them must consider anti-money-laundering laws and other statutes such as Combating the Financing of Terrorism regulations.
The document [PDF] also cites tightened regulations in the United Kingdom and Singapore. In January, the Monetary Authority of Singapore (MAS) took action to limit the promotion of digital payment tokens and UK's HM Treasury tightened regulations on soliciting sales of certain crypto assets.
Meanwhile, Mitsubish UFJ Trust and Banking Corp. said [PDF] once the legal framework is in place it will launch a Yen-backed stablecoin dubbed Progmat Coin.
Government regulation of stablecoins is likely to be welcome, given the spectacular implosion of so-called stablecoin TerraUSD. That crypto coin saw its value drop by 90 percent in May 2022. After that plunge, the value of linked cryptocurrency Luna tumbled down to almost nothing, suggesting DIY currency schemes lack the maturity that keeps fiat currencies afloat. ®