Japan To Reverse Ban On Foreign-Issued Stablecoins 

Japan To Reverse Ban On Foreign-Issued Stablecoins 

The country’s financial watchdog, the Financial Services Authority, released a consultation paper explaining its updated guidelines for stablecoins. The draft legislation, which is set to be applied to the country’s upcoming crypto framework, will reverse a previously imposed ban on foreign-issued stablecoins such as USDT and USDC. 

On Monday, Japan’s Financial Services Authority (FSA) unveiled a draft regulation and associated guidelines that will allow for stablecoins issued outside the country such as USDT and USDC to be listed on local cryptocurrency exchanges. The updated framework will be applied simultaneously with the revised Payment Services Act that will come into effect in 2023. 

Under the draft regulation, Japanese crypto exchanges will be allowed to distribute and handle payments-focused stablecoins, which are cryptocurrencies pegged 1:1 with the value of sovereign fiat currencies like the U.S dollar, euro or yen, under the condition they are able to maintain sufficient collateral in reserves. Stablecoins are designed to stabilise the price of volatile cryptocurrencies like Bitcoin (BTC), and can also be leveraged as a store of value. 

Japan To Ban On Foreign-Issued Stablecoins 

In a separate report, it was stated that the new regulation will reverse a previously imposed ban on the distribution of foreign-issued stablecoin in the country. Following the collapse of Terra earlier this year – who was the issuer of algorithmic stablecoin TerraUSD (UST) which lost its dollar peg costing billions to investors, the Japanese parliament passed a legal framework surrounding fiat-backed cryptocurrencies. According to provisions of the bill, stablecoins are considered as digital money and must be linked to the yen, Japan’s local currency, or any other legal tender. Thus guaranteeing holders the right to redeem the tokens at face value. 

The bill prepared in June by the country’s financial watchdog, the FSA, intends to provide a safety net for crypto investors. Under the legislation, which is set to become law in 2023, stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies. However, none of the 31 crypto exchanges licensed under the FSA currently list any stablecoins. 

FSA’s draft report highlights that exchanges and token issuers must follow a remittance limit for every transaction, which will be set at 1 million yen, approximately $7,500. Japanese brokers that wish to list cryptocurrencies including stablecoins must get the assets reviewed by the Japan Virtual and Crypto assets Exchange Association (JVCEA). So far 50 cryptocurrencies have been cleared by the JVCEA for trade in the country. Currently, exchanges can list new crypto tokens within 30 days of presenting their listing plan to the government body. In an interview given to Bloomberg, Genki Oda, Vice Chairman of the JVCEA, said that this waiting period will be shortened to two weeks starting April 2023, and the pre-screening process could be removed completely by March 2024. 

The Financial Services Authority will issue a mandate for stablecoin distributors to record all transaction information as to comply with its anti-money laundering (AML) guidelines. Recently, the Japanese government announced plans to expand its services into the NFT and metaverse sector. The government is also looking to ease its crypto tax rules, which is said to be the highest in the world, to embrace adoption and development of crypto assets in the country. 

The stablecoin framework which is open for public feedback until January 31, 2023, will come into force next year along with the Payment Services Act. However, the bill does not discuss provisions for algorithmic stablecoins like Tron’s USDD.

Also Read:

ECB Will Make a Decision on Issuing the Digital Euro in 2023

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