Japan wants to reverse ban on foreign stablecoins

Earlier this year, after the horrific collapse of the Terra ecosystem (LUNA), you could read in the crypto news that Japan had adopted a new regulatory framework for stablecoins. Stablecoins are cryptocurrencies whose value is pegged to another currency or asset.

Ban on foreign stablecoins

Under the new law, set up by Japan’s financial regulator, stablecoins have been labeled “digital money” in Japan. This means that only properly licensed banks and financial institutions are allowed to issue stablecoins. So there is a ban on foreign stablecoins and for that reason none of the 31 registered Japanese crypto exchanges currently list stablecoins.

As mentioned, the law was most likely a direct response to the massive crash of TerraUSD (UST) and LUNA. The algorithmic stablecoin lost its peg, or peg, with the US dollar and pulled the price of LUNA down with it. The law was expected to rekindle confidence towards stablecoins in Japan. This had suffered a significant dent after the collapse of the Terra ecosystem.

Good news for USDT and USDC?

According to local Japanese media, Japan’s financial regulator plans to lift the aforementioned ban. However, some conditions have been set by the financial regulator, including the requirement that local parties be involved and given responsibility to protect the value of the stablecoins.

In addition, it will not be possible to use more than 1 million Japanese Yen (approximately $7,000) per transaction for international stablecoin transfers. Finally, it will be mandatory to disclose the full identity of those involved to the financial supervisor.

Should the ban actually be lifted, that would be good news for the crypto market. It will open the doors for stablecoins such as Tether (USDT) and USD Coin (USDC) in the Japanese market.

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