Paving the way in cryptocurrency regulations, Japan has passed a law that clarifies the legal status of stablecoins to protect crypto investors.
Leading the way globally, Japan has approved a new stablecoin law to protect crypto investors and regulate mainstream currencies. The country has been working for five years already to build safety nets for those invested in cryptocurrencies. This law is well needed following last month’s TerraUSD collapse, and will implement a mandatory link with Japanese yen to clarify a stablecoin’s legal status.
Andrew Hauser, an official at the Bank of England, spoke last week about the risks TerraUSD and other digital currencies pose, calling for stricter regulations on stablecoins that reached “systemic size,” which should be met with the same standards as fiat.
Hauser added, “In practice, that is likely to mean being issued by a bank, or by a non-bank that is subject to rigorous central bank regulation and supervision.”
The bill passed by Japan’s parliament moved to define stablecoins as digital currencies that can be redeemed at face value. Coming into effect in 2023, the nation’s Financial Services Agency (FSA) will be sharing further details of the framework and restrictions for currencies. The FSA had previously stated that stablecoins required “a higher level of regulatory discipline,” and is well prepared to facilitate this new legal structure.
And moving forward, stablecoins will only be able to be issued by banks, trust companies, and select licensed money transfer agents, which may limit opportunities for international companies to enter Japan’s market.
Following the FSA’s successful commemoration of bitcoin as a currency in 2017, marking Japan as the first major economy to do so, the government soon after was also the first to officially license crypto exchanges. As the country continues to lead global cryptocurrency regulations, Mitsubishi UFJ Trust and Banking Corp has already shared plans to issue its own stablecoin, Progmat Coin.