What Japan’s Adjusted Regulations Mean for Stablecoins

Japan Financial Services Agency confirmed it will lift the ban on domestic use of foreign stablecoins in 2023. However, there is no information on which stablecoins will be permitted. The new bill, which will allow trading of stablecoins, is expected to be implemented in June 2023. This comes a year after the decision to ban foreign stablecoins.

In June 2022, the Japanese parliament was passed legislation banned foreign stablecoins and required stablecoin issuers to only link their cryptocurrency to Japanese yen or other recognized legal tender. Maybe influenced by the steps, crypto exchange Kraken and Coinbase has since opted to cease operations in Japan, citing weak market conditions.

The Japanese regulator’s new guidelines will require stablecoin issuers to pass individual checks for user protection prior to approval. These checks will ensure that foreign issuers comply with regulations in Japan and the underlying assets are properly protected.

"This does not mean that all foreign products of so-called ‘stablecoins’ will be allowed without any restriction," a spokesperson for Japan's FSA said in a statement. "FSA does not provide any opportunity to access such information before the decision is made,” the representative added.

Japan’s new stablecoin regulations are part of a proposed cabinet order and cabinet office regulations on amendments to the Payment Services Act 2022. Introduced in December 2022, the new regulations aim to define requirements for electronic payment instruments and develop related registration procedures.

The FSA will accept public comments on changes to the Payment Services Act until January 31, 2023. Per the statement, law enforcement deadlines is early June 2023.

As a major player in the global crypto market, Japan’s decision to lift the ban on the domestic distribution of stablecoins is very important as it will shape the future of stablecoins in the country.

The move highlights the increasing role of governments and regulatory agencies in the crypto market. They aim to establish clear regulations and guidelines to ensure user protection and increase stability in the industry.