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Japan Set to Allow Use of Foreign-Issue Stablecoins in 2023

The country's Financial Services Commission wants to make it easier for people to use stablecoins from other countries. Currently, stablecoins like USDC and USDT can't be bought or sold on any recognized crypto currency exchange in the country.

Photo by David Edelstein / Unsplash

The failure of the Terra/Luna exchange in May of 2022 brought to light the systemically significant role that stablecoins play in facilitating the operation of the crypto currency market. As a result, regulators made stablecoins a primary focus in 2022.

Japan is amongst the first countries to reexamine the constraints it put on the use of dollar-backed stablecoins by crypto investors who live in Japan. This comes after several nations moved to forbid or markedly constrain the usage of famous stablecoins supported by the United States dollar, such as Tether (USDT) and USD Coin (USDC).

According to a story (1) that the Nikkei news agency in Japan published, the nation's Financial Services Commission intends to ease restrictions on the local use of foreign-issued stablecoins. No recognized crypto currency exchange in the country supports trade in stablecoins like USDC or USDT.

Deposits will be required, and a cap on the amount can be sent outside. Still, Japan's newly enacted legislation will let local exchanges make stablecoin trades possible for preserving assets. If they maintain adequate assets, local distributors will be saddled with handling payments-focused stablecoins.

According to the study's findings, if more people start using stablecoins, international money transfers might become quicker and less expensive.

The Proposed New Regulations

The new regulations in Japan require that to produce stablecoins, issuers must first provide guaranteed value-added assets, and issuers can only be regulated businesses like banks, registered transfer agents, or trust firms. This restriction applies to all stablecoins created in Japan.

On December 26th, the FSA began accepting feedback from the general public regarding the revised guidelines. If stablecoins are to be distributed within the country's borders, the Financial Stability Authority (FSA) claims that further anti-money laundering legislation will be necessary.

It is anticipated that the new laws will substantially affect the trading services that are now available within the country. This is because no exchanges offer the option to trade the two most popular stablecoins.

One million yen, equivalent to $7,500 per transaction, has been suggested as the upper limit for the number of remittances that can be made using international stablecoins under the new standards.

Japan's Plan to Regulate Crypto Market

This new development emerges as Japanese authorities have all worked hard over the past several months to draft legislation connected to cryptocurrencies aggressively. On December 15th, the tax committee of Japan's ruling party, the Liberal Democratic Party, supported a proposal to exclude crypto enterprises from paying taxes on paper profits issued tokens. These businesses would be free from paying taxes on paper gains related to paper gains issued tokens.

Japan's Plans for a CBDC

Additionally, the nation has confirmed its desire to continue researching the construction of a new central bank digital currency, which will be known as the digital yen (2).

The next stage of the investigation will involve the Bank of Japan working with three megabanks & regional banks in the country to carry out a CBDC issuance pilot.

The goal of this pilot is to provide demo experiments in preparation for the Bank of Japan to begin issuing digital yen in the spring of 2023.

Other regulatory ideas include auditing rules for crypto currency businesses, governance improvements for the Japan Virtual Currency Exchange Association, and legislation that oversees decentralized autonomous organizations (DAO).

A multi-year cooperation deal between crypto miners in Japan and the country's regulatory authorities is also being actively pursued. Per a deal struck between the Japanese operator Tokyo Electric Support (TEPCO) and the equipment manufacturer TRIPLE-1, the mining of crypto currencies will be powered by additional grid electricity.