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The new move by Japan to allow the distribution of stablecoins means that there would be stricter regulations on Anti-Money Laundering controls.
The Financial Services Agency (FSA) in Japan has reportedly announced a draft system and guidelines for the circulation of stablecoins that are pegged on legal currencies like the USD, Pounds, etc. In June, the Japanese parliament passed a bill to limit stablecoin issuance to banks and trust companies, hindering non-financial institutions from accessing them. At the time, the government intended to protect investors and the entire financial system from risks associated with the rising adoption of stablecoins. Japan witnessed a massive adoption of stablecoins as the market climbed to around 20 trillion yen.
Japan Could Ease Restriction on Stablecoins
According to the 26th of December announcement reported by the local news agency Nikkei, the new framework will be in effect as early as 2023, in conjunction with the revised Payment Services Act. Upon its implementation, local crypto exchanges in Japan will be permitted to distribute foreign-issued stablecoins. However, these stablecoins will be provided if only they can prove sufficient collateral. The report added, “if payment using stablecoins spreads, international remittances may become faster and cheaper.”
Stablecoins are designed to stabilize other crypto assets that are typically volatile. Stablecoins are also tied to fiat currencies or commodities like gold. The latest measure in Japan will broaden the service rejected by crypto exchanges to include stablecoins. Currently, no Japanese exchanges provide trading in stablecoins like USDC or USDT. Official data also revealed that not one of the 31 exchanges operating in the country offers stablecoin services as of the 30th of November.
The new move by Japan to allow the distribution of stablecoins means that there would be stricter regulations on Anti-Money Laundering controls. Starting from the 26th, the FSA has started collecting public feedback on the proposal for easing the stablecoin ban in Japan. A separate report explains:
“As early as next year, the Financial Services Agency will lift the ban on the domestic distribution of foreign-issued coins for “stablecoin,” which aim to be linked to legal currencies such as the US dollar. In distribution, anti-money laundering (money laundering) measures are also required. However, the effectiveness of recording transaction information is questioned.”
The Digital Yen
In other news, the Bank of Japan plans to experiment with the digital yen in 2023. The central bank is reportedly looking forward to a proof-of-concept trial of the digital currency. To achieve this, it will collaborate with three megabanks and regional banks on a pilot test, including a demo experiment. Although there is no specific time frame for the release of the digital yen, there is security assurance. BOJ Governor Haruhiko Kuroda called for preventing risks that may come with adopting and using the digital yen.