Japan became one of the first major countries to establish a legal framework for stablecoins in June. Six months later, as the Financial Services Authority (FSA) is looking to lift a ban on foreign-issued stablecoins, it is taking another crucial step to tweak the existing ban.
It is unclear which tokens will be available. However, USDC backed by Circle and Coinbase and Tether’s USDT are expected to make a comeback. According to a report by local news outlet Nikkei, new stablecoin regulations could be introduced in 2023.
Japan’s relaxed stance on stablecoins
Under the new rules, distributors will be responsible for handling stablecoins rather than foreign issuers in order to protect their value. Domestic digital asset exchanges will be able to handle stable currency transactions under the condition of deposit protection and remittance upper limit.
The FSA proposes capping remittances of such stablecoins at 1 million yen (or $7,500 per transaction). On the other hand, for domestically minted stablecoins, issuers will be required to prepare assets as collateral. Furthermore, only banks, fund transfer service providers, and trust companies can be issuers in the Japanese stablecoin market.
The FSA will require stablecoin distributors to record transaction details, such as usernames, as part of anti-money laundering (AML) measures. The financial watchdog also plans to start gathering feedback on its draft stablecoin guidance proposal.
Stablecoins have been under the watchful eye of regulators for several years. The systemic risk to the ecosystem from quiet power players in the crypto space has been researched and investigated. This summer, Japan’s parliament passed a bill banning non-banks from issuing stablecoins, limiting issuance to licensed Japanese banks, registered remittance agents and trust companies.
The bill follows the implosion of TerraUSD which caused liquidity problems across the market. Still, the FSA made no mention of algorithmic stablecoins in what is considered the landmark legislation.
I hope you will now know that Japan is going to urbanize the stable coins. In December, Japanese regulators released a document highlighting their plans to limit algorithmic support for stablecoins. According to Japan’s Deputy Minister of International Affairs Tomoko Amaya, the FSA made recommendations, seeking to address the stance of algorithmic stablecoins for the first time.
