The Japanese Financial Services Agency (JFSA) will allow the domestic distribution of stablecoins minted overseas beginning in 2023, as reported by local media on December 26th.
Japan was one of the first advanced countries to establish stablecoin legal regulations and investor protections. Japan passed a law in June requiring tokens to be backed by the yen or another fiat currency and ensuring that owners may redeem them for their face value.
However, the report claims that JFSA plans to apply the updated “Revised Payment Services Act” set to take effect next year after amending Cabinet Office regulations and developing guidelines.
The report stated:
The guidelines will show detailed rules based on the revised Payment Services Act. For domestically issued stablecoins, the issuer will be required to prepare collateral assets as collateral.
Regarding stablecoins issued overseas, which are scheduled to be lifted, the distributors who handle the tokens in Japan will be required to protect the assets. Issuers can only be banks, trust organizations, and fund transfer service providers.
Its distributors are expected to be required to keep track of transaction details, including identities, as a countermeasure against money laundering.
The upper remittance limit will be 1 million yen ($7500) per transaction. The target markets for stablecoins are currently unknown, although it’s possible that it will be US Circle and Coinbase-produced USD Coin (USDC).
“Algorithmic Stablecoins” May Subject To Tight Regulation
On the other hand, according to the report, the FSA may in the future tighten laws on “algorithmic stablecoins” based on presentation materials made by Amaya, FSA’s international deputy director-general.
The report pointed out that because algorithmic stablecoins are also uncollateralized, they could spread to the financial market in the case of a failure, similar to the collapse of UST (TerraUSD). “It cannot be denied that it lacks reliability in comparison.”
Besides this, the report also highlights that:
Stablecoins were also mentioned at the Digital Agency’s Web 3.0 Study Group in October. The perspective was that stablecoins could also be useful for local community DAOs.
When towns undertake small-scale Web3 projects aimed at regional rejuvenation, one of the research group members indicated that stable coins with stable pricing would be helpful.