Japan became one of the first major countries to create a legal framework for stablecoins in June. Six months later, Japan is said to be looking to make a U-turn by modifying the existing ban as the Financial Services Agency (FSA) is working to lift the ban on foreign-issued stablecoins.
It is still unclear which tokens will be provided. However, Circle and Coinbase-backed USDC and USDT Tether are expected to make a comeback. Based on, a report by local news agency Nikkei, new stablecoin regulations may be introduced in 2023.
Under the new rules, distributors will be tasked with handling stablecoins instead of foreign issuers to protect their value. Digital asset exchanges in the country will be able to handle trading of stablecoins under conditions of preservation of assets through deposits and limits on remittances.
The FSA has proposed that the maximum amount of remittances for such stablecoins be capped at 1 million yen (or $7,500 per transaction).
For domestically pegged stablecoins, issuers will be required to provide assets as collateral. Additionally, only banks, fund transfer service providers and trust companies can be issuers in the Japanese stablecoin market.
The FSA will mandate stablecoin distributors to record transaction details such as usernames as part of anti-money laundering (AML) measures. The financial regulator also plans to start collecting feedback on proposals for its draft guidelines on stablecoins.
Stablecoins have been on the radar of regulators for several years. Most industry players are also being investigated to measure risk. Previously, the Japanese parliament passed a bill to ban the issuance of stablecoins by non-banking institutions and stipulate that such issuance be limited to licensed banks, registered money transfer agents and trust companies in Japan.
The bill was introduced after the TerraUSD boom that triggered liquidity issues across the market. This December, Japan's regulator published a document highlighting its plans to block support for stablecoin algorithms. According to Japan's Vice Minister of International Affairs, Tomoko Amaya, a proposal has been made by the FSA that aims to address the stance against algorithmic stablecoins for the first time.
