Japan passes new stablecoin bill to protect investors
Following the collapse of TerraUSD, the upper house of Japan’s parliament has passed a bill on stablecoins in a bid to protect consumers.
The bill imposes a link between stablecoins and the yen and guarantees the right of holders to cash out at face value. Under the new framework, only banks, trust companies, and certain financial service providers will be able to issue stablecoins in Japan.
This may present as a hurdle for foreign crypto companies looking to enter the market.
The move comes as a part of the nation’s five-year initiative to crack down on the risk associated with cryptocurrency investment. Along with the rest of the world, Japan aims to develop safety nets to protect investors from volatility and cybercrime.
Stablecoins, in particular, tend to offer token holders a false sense of security, as argued by international regulators. Tokens pegged to mainstream currencies have proven their ability to fold under pressure in the recent market downturn.
Although, prior to the crash, Japan’s Financial Services Agency (FSA) had been keeping tabs on the digital asset industry and drafting new laws for stablecoins. The financial body has been pushing for a more clearly defined legal framework and increased “regulatory discipline” for some time now.
Still, Japan is recognized as one of the world’s most progressive hubs for crypto regulation. Bitcoin and other digital currencies are considered legal property under the Payment Services Act (PSA).
Since 2017, earnings from crypto have been categorized as ‘miscellaneous income’ and taxed accordingly – a big plus for investors.
And now, with the passing of this bill which is set to come into effect in 2023, stablecoins are essentially defined as digital currencies and are subject to the same terms.
Japan’s FSA is expected to shed more light on the regulations over the next few months.