In a long-prepared set of new regulations, Japan has set stricter rules on stablecoins and their issuance in order to protect consumers and the Japanese economy from potential volatility. Leo Lewis and Kana Inagaki report for the Financial Times:
Japan has passed a landmark law clarifying the legal status of stablecoins, surging ahead in an international race to construct safety nets around the tokens whose peg to mainstream currencies underpins the broader cryptocurrency market.
The move by Japan, part of a five-year effort to protect consumers investing in cryptocurrencies, followed last month’s shock collapse of TerraUSD, which triggered a debate about whether the tokens should be regulated, banned or left alone.
Japan’s Financial Services Agency had been preparing regulations for stablecoins well before the market unravelled, and argued in a paper last year that “a higher level of regulatory discipline” was required for instruments with such significant potential impact on financial stability.
The upper house of Japan’s parliament on Friday passed a bill that essentially defined stablecoins as digital currencies, imposed a mandatory link with the yen and enshrined the right to redeem them at face value.
The legal structure will come into effect in 2023, with the FSA expected to clarify the rules for stablecoin issuers in the coming months. Analysts said the legal framework may make it difficult for foreign players to enter the market.
Under the new legal definition in Japan, the issuance of stablecoins will be restricted to banks, trust companies and certain licensed money transfer agents.
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