Japan’s parliament has passed legislation allowing yen-linked stablecoins, becoming one of the first countries – and by far the largest economy – to regulate a form of non-fiat digital currency.
The regulations state that only banks and other registered financial institutions — such as money transfer agents and trust companies — can issue Alterna-Cash. Intermediaries, or those responsible for the movement of currency, will be required to adopt stricter anti-money laundering measures. The rules also define stablecoins as digital currency and guarantee repayment of face value.
The Japan Financial Services Agency (FSA) launched the scheme in a March 2021 proposal. Parliamentary approval of the proposal means it will come into force in 2023. The regulations will apply to domestic financial institutions as well as foreign operations that target Japanese users. The research material supporting the decision relied heavily on trends in the US and Europe.
On the day of the decision, the FSA published a document that considers the global use of stablecoins and advocates their use in Japan – with appropriate regulation.
In the United States, the FSA noted, stablecoins are unregulated, but those who handle them must take heed of anti-money laundering laws and other laws such as anti-money laundering regulations. terrorism.
The document [PDF] also cites tightened regulations in the UK and Singapore. In January, the Monetary Authority of Singapore (MAS) took action to limit the promotion of digital payment tokens and the UK Treasury tightened regulations on the solicitation of sales of certain crypto assets.
Meanwhile, Mitsubish UFJ Trust and Banking Corp. said [PDF] once the legal framework is in place, it will launch a yen-backed stablecoin called Progmat Coin.
Government regulation of stablecoins is likely to be welcome, given the dramatic implosion of the so-called stablecoin TerraUSD. This cryptocurrency saw its value drop by 90% in May 2022. After this plunge, the value of the linked cryptocurrency Luna fell to almost nothing, suggesting that DIY currency systems lack the maturity that maintains fiat currencies afloat. ®