Japan passes stablecoin bill for investor protection
Japan has become one of the first countries to establish a legal framework around stablecoins, spurred by the Terra-Luna fiasco that resulted in billions worth in losses.
On Friday, the Japanese parliament passed a bill that effectively recognises stablecoins as digital money, clarifying the government's stance on the digital asset class. According to the bill, stablecoins must be backed by the yen or any other legal tender so as to guarantee holders the right to redeem them at face value.
The new law states that stablecoins can only be issued by licensed banks, registered money transfer agents, and trust companies. The bill didn't discuss existing asset-backed like Tether or algorithmic stablecoins. It is also worth noting that Japanese crypto exchanges do not list stablecoins.
The Financial Services Agency (FSA) of Japan had laid the groundwork for the bill since late last year. In March, the Japanese parliament accepted the bill and finally passed it in June. FSA has said the new framework would be fully implemented in a year.
Already, firms in Japan have started to take advantage of the new bill. Mitsubishi UFJ Trust and Banking Corp. has revealed its intention to issue its own stablecoin, called Progmat Coin, once the framework is fully operational. According to the bank, the token will be pegged to the Yen in a trust account, which will guarantee redemption at face value.
Since Terra’s collapse, world governments have started putting regulations on stablecoins to reduce the risk of another catastrophic loss. The government of the United Kingdom proposed regulations on stablecoins at the end of May.
As for Terra’s collapse, the community recently pushed a plan to move the project to another blockchain. The stablecoin, now called Terra Classic, still runs on the old blockchain and currently trades for US$0.00009.