Japan goes one step further with its crypto regulations. A bill has been passed that restricts the issuance of stablecoins and other digital assets whose value is pegged to fiat currencies or stabilized by an algorithm to banks and trust companies.
Stablecoin issuance is restricted
The approved bill effectively restricts stablecoin issuance to licensed banks, registered money transfer agents and trust companies in Japan. It also introduces a new registration system for financial institutions to issue such assets and provides for anti-money laundering measures.
The bill specifically aims to protect investors and the country’s financial system from risks associated with the rapid adoption of stablecoins.
The new legal framework is said to be officially in effect in 2023. This means there is still time to make a detailed plan with all those involved on how exactly this will work.
The great example that Japan is now opting for this is the recent crash of Terra, the value of which fell by more than 99% in a short time. The pegged Terra stablecoin, Terra USD (UST), also lost its 1:1 value to the US dollar ($) during this crash.
However, not only UST faced problems, as other algorithmic stablecoins (including DEI) lost their dollar peg as well. It is not yet known if more stablecoins will see a similar fate in the near future.