Japan has relatively been stricter towards the adoption and use of stablecoins within its jurisdiction. However, recent reports cite some relief for stablecoins advocates in Japan.
On Monday, a report was published in the local daily which stated that Japanese regulators are reconsidering some major restrictions placed on the applications of stablecoins like Tether (USDT) or USD Coin.
As per the report, Japan’s Financial Services Agency (FSA) will lift the ban on the domestic distribution of foreign-issued stablecoins in the coming year. The FSA is a Japanese government agency and an integrated financial regulator responsible for overseeing banking, securities and exchange, and insurance sectors in order to ensure the stability of the financial system in the country.
If the ban is lifted on foreign-issued stablecoins, the party responsible for stablecoins in Japan would automatically be the distributor. Per the report, distributors will handle the tokens instead of the foreign issuers to protect their value. The new stablecoin regulations in the country would authorize local exchanges with the power to handle stablecoins trading however under conditions of asset preservation by deposits and an upper limit of remittance. The report states:
“If payment using stablecoins spreads, international remittances may become faster and cheaper.”
Meanwhile, the maximum amount of remittances for such stablecoins is proposed to be capped at 1 million yen ($7,500) per transaction. However, it is unclear which stablecoins will be returned to Japan. The U.S.-based Circle-issued USDC could be one of the stablecoins to make an entry into Japan. Tether (USDT), the largest stablecoin, could be another player.
The FSA said that if the stablecoin distribution is allowed in Japan then there would also be a need for more regulation especially related to anti-money laundering controls. They also started collecting feedback proposals for lifting the stablecoin ban in the country.
This step from Japanese regulators will also impact the crypto trading services in the country as none of the exchanges in the country provide trading in stablecoins.
Todayq News reported in June this year, the Japanese parliament passed a bill that clarified the legal status of stablecoins. The bill defines stablecoins as digital money. It says clearly that stablecoins must be linked to the Yen or another legal tender. The bill was planned back in 2021 by Japan’s top banking regulator which seeks to limit the issuance of stablecoins to banks.
On December 7, the FSA released another notification addressing algorithmic stablecoins which weren’t previously done. The regulator recommends restricting the algorithmic backing of stablecoins.