Japan Passes Stablecoin Bill to Protect Investors

  • After the bill takes effect in 2023, only licensed banks, registered money transfer agents, and trust companies will be allowed to issue stablecoins in Japan.
  • The bill notes that in order for stablecoins to be considered digital money, they must be linked to the price of yen or another legal tender.
Court of justice sign written in Japanese outside court

Court of justice sign written in Japanese outside court. Shutterstock

Japan has become one of the first countries in the world to pass a legal framework for stablecoins, providing clarity about their definition and who can issue them, Bloomberg reported on 3 June.

According to the announcement, the bill was prepared by Japan’s Financial Services Agency (FSA) in late 2021, accepted by the House this March, and finally passed by a majority in the House of Councilors plenary session. The new legal framework will reportedly come in effect sometime in 2023, with the FSA using the remaining time to develop and introduce regulations regarding stablecoin issuers.

The bill has finally clarified the definition of stablecoins in Japan, which will now be considered as digital money, and must be linked to the price of the yen or another legal tenders as to guarantee its holders right to redeem the token at face value. The bill also places limitations on who can issue stablecoins, the right to which will belong to licensed banks, registered money transfer agents, and trust companies.

Japanese news agency Nikkei noted that the new legal framework is meant to protect not only investors, but also the financial system from the risks associated with the rapid adoption of stablecoins. Surprisingly, the bill does not address the issue of existing asset-backed and algorithmic stablecoins, though exchanges in Japan are known for not listing stablecoins.

Japan’s stablecoin bill comes almost a month after the TerraUSD (UST) token disaster. At the start of May, Terra’s algorithmic stablecoin started to lose its 1:1 peg to the U.S. dollar and eventually collapsed in price, which resulted in multi-billion losses on the crypto market. Some might even argue that the collapse of UST was one of the main driving forces behind the massive decline of the cryptocurrency market we have experienced in the past month.

Discussion
Related Coverage
Japan to Implement New Crypto Exchange Regulations
  • The proposed changes to Japan’s Foreign Exchange and Foreign Trade Act will require crypto exchanges to block transactions connected to sanctioned individuals.
  • The move is specifically targeted at sanctions against Russia following its military actions in Ukraine.
March 29, 2022, 10:46 AM
japan

Shutterstock

Rakuten Launches NFT Marketplace in Japan
  • The new NFT marketplace, called Rakuten NFT, is already holding its first token drop, which includes NFTs from the Ultraman anime and Kurogane Hiroshi G1 Gekitoshi manga.
  • Rakuten is now working on a peer-to-peer NFT issuing and selling service, which is expected to launch in 2023 or later.
Japan’s Biggest Bank to Release Yen-Pegged Stablecoin in 2023
  • Called “Progmacoin”, the new stablecoin will be designed to save millions of dollars by making the settlement process instantaneous.
  • It will first be used for settlement of digital securities on the upcoming SBI and SMBC digital exchange, set to go live later this year.