Japan has passed its stablecoin regulation bill as it seeks to enshrine investors’ protection with respect to unforeseen eventualities with the instability in stablecoins.
The bill was passed by the Japanese Parliament on Friday and it clarified the legal status of stablecoins as digital money, a designation that implies they can now only be issued by licensed banks, registered money transfer agents, and trust companies.
The new stablecoin bill is set to take effect sometime next year and with it, investors can redeem the coin at face value as it is now compulsory for the tokens to be pegged to the Japanese Yen or other tangible assets.
The new stablecoin regulation did not have any clause that addressed existing stablecoins including Tether (USDT) or some other forms of assets in circulation today.
The stablecoin bill has been in the works since 2021 as it was prepared by the country’s Financial Services Agency (FSA), was accepted by the House in mid-March this year, and has now been passed by a majority in the House of Councilors plenary session.
Japan and its Headstart in Stablecoin Regulation
Every regulator around the world has been exploring avenues to bring comprehensive oversight to the digital currency ecosystem, especially to stablecoins that exhibit a very close similarity to fiat currencies.
The collapse of Terra brought a whole new awakening that heightened the pursuit by financial watchdogs to hasten their establishment of regulators that can protect investors across the board. Japan now has a very good headstart as it relates to investor protection with the new bill, a trend many other countries will hope to imbibe in the near future.
Both the United States and countries in the European Union and the United Kingdom are also exploring ways in which they can boost the framework that guides stablecoins and digital assets in the country. Undoubtedly, the move by Japan will serve as a reference point for more lawmakers around the world to be proactive in the protection of their citizens.