Japan Considers Reversing Ban on Stablecoins Issued Abroad: Report

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Japan’s Financial Services Agency (FSA) has announced a draft system and guidelines for the circulation of stablecoins whose value is tied to legal currencies such as the US dollar, according to a Nikkei report on Monday.

The new framework will be enforced in conjunction with the entry into force of the revised Payment Services Act in 2023, allowing domestic distributors to handle stablecoins issued overseas provided they maintain sufficient collateral.

Stablecoins are a type of cryptocurrency whose value is usually tied to a fiat currency such as the US dollar, euro or pound, or to commodities such as gold.

They are designed to stabilize the price of otherwise volatile cryptocurrencies like Bitcoin and can also be used as stores of value or units of account.

FSA invites comments

A separate report states that the FSA is seeking public comment on a draft rule that will allow local crypto exchanges to manage stablecoin trading, meaning that popular stablecoins like Tether (USDT) or USD Coin (USDC) could start trading on Japanese stock exchanges.

According to the report, the Japanese watchdog still has doubts about the effectiveness of recording transaction information. The FSA also believes that stricter anti-money laundering measures will be needed after the ban is lifted.

Currently, none of the 31 Japanese crypto exchanges registered with the FSA list any stablecoins.

The FSA’s latest decision follows the historic law of the Japanese parliament last June, which clarified the legal status of stablecoins, essentially defining them as digital currency.

Under the legislation, which is expected to come into force in 2023, stablecoins must be pegged to yen or another legal tender and guarantee their holders the right to redeem them at face value.

The bill also stipulated that stablecoins could only be issued by licensed banks, registered money transfer agents, and trust companies.

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