According to Nikkei Asia, Japan is considering new regulations that will limit stablecoin issuance to banks and wire transfer providers.
Stablecoins are a sort of digital money that is linked to an external asset, such as a fiat currency, gold, or other assets, in order to maintain price stability. Tether is an example of a stablecoin, and it has sparked debate in the past. The CFTC penalized it $41 million in October for past assertions that each token was backed 1-to-1 by its cash reserves — “Tether reserves were not ‘fully backed’ the majority of the time,” according to the CFTC.
The Financial Services Agency (FSA) of the government expects to submit the law in 2022, following similar intentions in the United States to regulate stablecoins. The US Treasury Department urged Congress in November to approve laws prohibiting any entity other than banks from printing money.
The Treasury claims that this will help prevent “runs,” in which consumers rush to cash out their coins in fear that the currency’s issuer will go bankrupt, thereby upsetting other financial markets. The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency all declared that in 2022, they will clarify the laws and regulations governing cryptocurrencies.
In addition to the restrictions on stablecoin issuance, Japan’s Financial Services Agency (FSA) plans to tighten additional regulations. The agency will monitor stablecoin wallet providers and compel them to follow particular security procedures, including as reporting any suspicious behavior and validating users’ identities.
In 2022, Japan wants to introduce a yen-based cryptocurrency. The currency, which might be dubbed DCJPY, will be backed by bank transactions and designed to speed up huge money transfers between businesses.