Japan Passes a Stablecoin Bill

Japan Passes a Stablecoin Bill to Protect Investors

The Japanese government recently passed a bill that will provide regulatory oversight for Stablecoins and cryptocurrency exchanges in the country, with an aim to protect investors. The bill was drafted in response to the collapse of TerraUSD, or UST, that occurred a month ago, which caused losses totaling billions. The collapse precipitated a rapid selloff across all cryptocurrencies and the Terra network that supported UST and its sister currency, Luna.

The bill is seen as a way to bring greater legitimacy to the cryptocurrency industry in Japan.

The landmark bill will regulate stablecoins and their issuers. The bill is intended to protect investors from volatile crypto markets and to reduce the risk of fraud and manipulation. Under the bill, issuers of stablecoins will be required to register with the Financial Services Agency (FSA), the country’s financial regulator. They will also be subject to annual audits by certified public accountants.

What is a Stablecoin?

A Stablecoin is a cryptocurrency that is pegged to a stable asset, such as gold or the US Dollar. The peg ensures that the value of the Stablecoin does not fluctuate wildly like other cryptocurrencies, making it a more stable and predictable investment.

The FSA will also have the power to suspend or shut down exchanges that are not compliant with regulations. In addition, the bill requires exchange operators to implement measures to prevent money laundering and terrorist financing.

What does the Stablecoin Legislation Mean for the Industry?

The passage of this bill is a positive development for the cryptocurrency industry in Japan, as it provides greater clarity and certainty around regulation. It also signals a willingness on behalf of the Japanese government to work with the industry, rather than against it. This is likely to encourage more businesses and individuals to get involved in cryptocurrencies, which could help drive further adoption of these innovative technologies.

According to the legal definition, stablecoins can only be issued by licensed financial institutions, registered money transfer agents, or trust institutions. The legislation does not cover asset-backed stablecoins that have already been issued by foreign issuers like Tether, nor does it address their algorithmic equivalents.

Stablecoins are not listed on any of Japan’s cryptocurrency exchanges.

The law in Japan acknowledges stablecoins as a form of digital currency. This is an important step forward for the cryptocurrency segment as a whole, and it has the potential to pave the way for a wider acceptance of digital assets.

Despite the fact that this new regulation is good news for the cryptocurrency industry, it is still unclear how Japan will govern stablecoins in actual practice.

It is also important to keep in mind that other countries have been slower to come around to the idea of cryptocurrencies, which means that Japan may be in the lead when it comes to the acceptance of digital money adoptions.

A year from now, the revised legislative framework will become operational. The Financial Services Agency of Japan has announced that it plans to introduce regulations that will control issuers within the next few months.

Stablecoins are becoming increasingly popular as investors look for alternatives to volatile assets like Bitcoin. While there are many different types, they all share the same goal: to provide stability in an otherwise unstable market.

Benefits of Investing in a Stablecoin

First, they offer protection from volatility; because their value is tied to a stable asset, they are less likely to experience the drastic swings in price that often occur with other cryptocurrencies.

Second, they can be used as a hedging tool; by investing in a Stablecoin, investors can safeguard against losses if the market takes a turn for the worse.

Finally, because they are pegged to real-world assets, they can be used in everyday transactions. Unlike Bitcoin or Ethereum, which can be difficult to spend due to their volatility, Stablecoins can be used to buy goods and services without fear of price fluctuations.

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Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.

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