Japan to Reverse Course on USD-Pegged Stablecoin Ban in 2023

The future for stablecoins in Japan may be looking forward to better days as the government is mulling the idea of lifting the ban which was placed on the digital asset class.

In a new development, the Japanese Financial Services Agency (FSA) may reverse its course on the circulation of the United States dollar-pegged stablecoins Tether (USDT) and USD Coin (USDC).

“In 2023, the Financial Services Agency will lift the ban on domestic distribution of stablecoins issued overseas.”

Currently, none of the 31 FSA-registered cryptocurrency exchanges in Japan offers trading in either USDT or USDC. However, 2023 promises to be a better year for foreign stablecoin in the country. Once the ball is set rolling, a remittance limit of 1 million yen which is approximately $7500 per transaction will be set. 

Japan Rejigs it’s Crypto Ecosystem

Japan first passed its stablecoin regulation bill in June to properly position institutional investors especially after recognizing that uncertainties still lie with stablecoins.

However, with the new bill, stablecoins were regarded as digital money with no mention made of USDC or USDT rather it talked about Japanese Yen-pegged stablecoins. This move implies that they could now be issued by licensed banks, registered money transfer agents, and trust companies.

The local exchanges in Japan get to handle stablecoin trading but under the condition of asset preservation by deposits and an upper limit of remittance with the new stablecoin regulation. Likewise, they would need to organize collateral assets. “If payment using stablecoins spreads, international remittances may become faster and cheaper,” the report stated.

More regulations related to schemes such as anti-money laundering (AML) will need to be put in place.

Therefore, the Japanese FSA requires that transaction information like usernames are collected before the distribution of stablecoin to build a Know-Your-Customer (KYC) scheme. The Financial Services Agency says it is open to receiving draft guidelines for the stablecoins.

In 2021, the agency mentioned its plan to follow in the footsteps of the U.S. to roll out stricter measures for regulating the stablecoin industry especially due to fears that Tether issuer may declare bankruptcy. Generally, Japan has been doing so much to improve its crypto industry.