Japan Defines Stablecoins as Digital Money in New Bill

Japan is a step closer to regulating stablecoins as the country passes a new bill defining the status of such assets, Bloomberg reported Friday. This comes shortly after the recent TerraUSD (UST) crash that led to the loss of over $40 billion. 

Japan Defines Stablecoins as Digital Money

The bill defined stablecoins as digital money. Although it will take a year for the new legislation to take effect, the move makes Japan one of the first major economies to legalize stablecoins. 

The legislation states that stablecoins must be linked to the yen, Japan’s official currency, or another legal tender. In addition, stablecoin holders must be able to redeem them at face value.

Furthermore, stable digital assets can now only be issued by licensed banks, registered money transfer agents, and trust companies. The legislation does not cover existing asset-backed or algorithmic stablecoins like Tether (USDT). 

This also means that Japanese crypto exchanges will not be able to list approved stablecoins on their platform, since they are not allowed to do so. 

Japan’s Financial Services Agency (FSA), which will oversee the stablecoin regulation, said it will soon prepare a  framework guiding stablecoin issuers.

Some major banking firms in the country, including Mitsubishi UFJ Trust and Banking Corp., said plan on issuing their own yen-backed stablecoins once the guidelines are in place. 

More Stablecoin Regulations

In early May, the crypto market suffered a significant setback due to the catastrophic collapse of Terra’s algorithmic stablecoin, TerraUSD (UST). Since then, global regulators have continued to seek ways to toughen their stance on this kind of asset.

Following the crash, Janet Yellen, the secretary of the United States Treasury, called for legislation to be passed on such digital assets.

Last week, South Korea’s regulator, the Financial Services Commission (FSC), said it was planning to strengthen global cooperation to intensify regulations guiding digital assets like stablecoins.

Similarly, the UK Treasury recently amended existing rules that will give the Bank of England (BoE) more power to oversee stablecoin issuers to prevent future risks.