Stabilecoin regulation in Japan
After the collapse of Terra and cryptocurrencies brought the global economy into focus, Japan was one of the first major economies to adopt a legal framework for stablecoins.
The Japanese parliament passed a bill clarifying the legal status of stablecoins. Under the new law, stablecoins will be pegged to the yen or another local currency, guaranteeing holders the right to use them at par.
The new law means stablecoins can only be issued by licensed banks, registered brokers and trust companies. The legislation does not address existing asset-backed stablecoins or their algorithmic counterparts from foreign institutions like Tether.
Governments around the world are racing to erect security barriers around stablecoins, a crucial part of the cryptocurrency industry, following the collapse of TerraUSD and the so-called safe asset causing billions of dollars in losses.
According to data compiled by CoinGecko, the total market capitalization of such tokens is approximately $161 billion.
The new legal framework will come into force within a year. The Financial Services Authority of Japan said regulations for stablecoin issuers will begin in the coming months.
Mitsubishi UFJ Trust and Banking Corp. said it plans to issue its own stablecoin called Progmat Coin after the regulatory framework comes into effect.
The bank, a unit of Mitsubishi UFJ Financial Group Inc., said the token will be fully backed by yen held in escrow and will guarantee redemption at face value.