Japan’s parliament approved a draft law to govern stablecoins and protect investors. After the collapse of the algorithmic stabilitycoin terrausd, the new legislation was among the first.
Japan’s Stablecoin Law is Approved after the UST Collapse
Japan’s lawmakers have passed legislation to clarify the legal status and rights of stablecoins. Bloomberg reported that these cryptocurrencies were effectively classified as digital money by the bill’s authors following Friday’s vote.
With the new law, Japan becomes one of the first major economies to develop such a framework after last month’s collapse of the terrausd (UST) stablecoin and its sister cryptocurrency terra (LUNA). It caused major market declines and a loss of trust in stablecoins.
The legislators approved the following provisions: Stablecoins have to be pegged against the Japanese Yuan or other legal tender. They also give holders of guarantee the right to exchange them for their actual face value. You can only issue them in Japan from licensed banks and registered money transfer agencies, trust companies, or registered financial institutions.
A stablecoin is one example that the Mitsubishi UFJ Trust and Banking Corp. intends to circulate. Mitsubishi UFJ Financial Group Inc.’s banking division revealed that the Progmat Coin would be completely backed and redeemable by the yen.
Japan’s new legislation does not address, however, existing asset-backed stablecoins from overseas issuers like tether (USDT) or algorithmic stablecoins. Japan’s digital asset exchanges do not currently list such cryptocurrencies, the report notes.
Stablecoins, of which the leading ones include USDT, Circle’s usd coin (USDC), and binance usd (BUSD), have a combined value of over $160 million. They are believed to be safe, but regulators all over the globe have worked to establish regulations to protect this kind of cryptocurrency asset. This is due to the importance they play in the entire crypto market as highlighted by the implosion of the Terrausd. Another important consideration is to ensure investor protection.
Within a year, Japan’s new legal framework will go into effect. Meanwhile, the country’s Financial Services Agency (FSA) intends to introduce regulations governing the activities of stablecoin issuers in the coming months.
Are you optimistic that other large economies will soon adopt legislation to support stablecoins? Leave a comment below.
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