Japan’s new bill on stablecoins sets a high standard for protecting investors


Stablecoins now have a clear legal position in Japan, according to new laws enacted by the country’s government. Stable crypto assets must also be able to be redeemed at face value by any company that provides them.

Stablecoins are now protected by rigorous investor safeguards in Japan, the first country to do so. As of Friday morning, Japan’s upper house of parliament has enacted new law designating stablecoins as a kind of digital money. In terms of investor protection, this law goes above and beyond anything that has hitherto been implemented anywhere else around the globe.

Japan’s new stablecoin regulation mandates that stablecoins tied to the yen or another legal tender currency must always be able to be exchanged for cash at face value. The new definition of stablecoins mandates that they may only be issued by licenced banks, registered money transfer agents, and trust firms, as well as other financial institutions.

Tether’s USDT, for example, is not included in the new regulation since Japanese crypto exchanges do not yet offer it for trading. The new rules must be followed by firms like tether if they wish to sell their stablecoins in the Japanese market in the future.

It is believed that specifications for stablecoin issuers would be clarified in the coming months by Japan’s Financial Services Agency. An official “Progmat Coin” tied to the value of the Japanese yen will be issued by one of the country’s biggest financial institutions, Mitsubishi UFJ Trust and Banking Corp.

Stablecoin regulations have been tightened in a number of countries recently, including those other than Japan. As part of the government’s commitment to cryptocurrency innovation, Her Majesty’s Treasury has revealed intentions to regulate stablecoins as a payment method in the nation. Reports show that UK authorities are likewise mainly concerned with protecting investors.

The collapse of algorithmic stablecoin TerraUSD has dominated recent regulatory talks on stablecoins. With its dollar peg broken and holders fleeing the banks, UST began to fall apart in early May. The algorithmic stabilising mechanism of UST eventually wrecked the LUNA token of the network by over 98% without being able to reestablish its dollar peg. The cryptocurrency market lost more than $40 billion in value as a result of the episode, which grabbed the attention of lawmakers across the globe.

Stablecoin investors will be the first to benefit from Japan’s new right-to-redeem law. Stablecoins and cryptocurrencies aren’t the first to be subject to regulation, and it seems that this isn’t the final time.

Also Read: Bermuda relies on a transparent regulatory structure to attract more crypto businesses

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