The Stablecoin bill passed by Japanese lawmakers is bound to take effect 12 months from now, and irrespective of these delays, the bill will still make the Asian giant the first to pioneer this area of the growing blockchain ecosystem.
Japan has made history as the first country to pass a bill that establishes a legal framework surrounding stablecoin. The country’s parliament passed the Bill on Friday as it hastened its approach to the stablecoin regulation following the collapse of UST, the algorithmic stablecoin of the Terra blockchain protocol.
A stablecoin is a digital currency that maintains an equivalent peg with a fiat currency or anything of value that makes their prices relatively stable. The most popular stablecoins include USDT, and USDC, both of whom primarily have dollar-backed reserves with which they maintain a 1:1 peg.
The new bill from the Japanese parliament is all geared toward protecting investors, and ensuring they are able to liquidate their holdings irrespective of the market outlook at the time. The new bill defined stablecoins as digital money, a designation that implies they can now only be issued by licensed banks, registered money transfer agents, and trust companies.
Stablecoins are typically mostly associated with digital currency trading platforms, but based on what has been playing out in Japan, no cryptocurrency exchange in Japan lists stablecoins. The new bill will also mandate that stablecoins be pegged to the Japanese Yen, a push that will further enhance the liquidity flexibility of stablecoins that will flood the Japanese market.
The Stablecoin bill passed by Japanese lawmakers is bound to take effect 12 months from now, and irrespective of these delays, the bill will still make the Asian giant the first to pioneer this area of the growing blockchain ecosystem.
Japan Stablecoin Legislation: a Case of Proactivity
That stablecoins maintain a peg with the US Dollar and fiat currencies, in general, has made it possible for countries and regulators to pay extra attention to the innovation they embody.
However, the fact that stablecoins have a very close link to cryptocurrencies has given regulators something negative to ponder on, thus necessitating the general embrace of new approaches to the unique asset class.
Japan started exploring its regulatory approach back in 2021. The stablecoin bill was prepared by Japan’s Financial Services Agency (FSA) and while it has been in planning for months since last year, it 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.
The European Central Bank (ECB) also has plans to bring stablecoins under regulatory scrutiny and there are expectations that its approach will be captured in the Markets in Crypto Assets (MiCA) bill scheduled to be introduced anytime this year. The US administration under President Joe Biden has also been calling for stablecoin regulations in America, a move that will bring oversight to the largest stablecoins that have their direct and primary backing in US Dollar.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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