Japan looks set to ease stablecoin restrictions in the country next year, lifting its ban on the distribution of foreign-issued stablecoins.
On Monday, local news outlet Nikkei reported that Japan’s Financial Services Agency (FSA) is planning to end its ban on the circulation of foreign-issued stablecoins in 2023, allowing exchanges operating in the country to trade in stablecoins “under the condition of asset preservation by deposits and upper limit of remittance.”
Following the collapse of TerraUSD in May, Japan was quick to introduce a legal framework regarding stablecoins, and in June, Parliament passed a bill defining the legal status of stablecoins in the country, categorizing it as digital money and requiring assets to be linked to the yen or another legal tender.
On Monday, the authorities began collecting feedback on ideas for easing these stablecoin restrictions, with the result appearing to be consensus around a softer approach to the area.
The rumored easing of regulations would allow local exchange platforms to provide stablecoin trading, which would substantially impact the digital asset market in Japan, where currently none of the 31 registered exchanges are dealing in the assets.
Despite recent events, the news signals a further embracing from Japanese lawmakers’ of the digital asset space, coming as it does a month after the Bank of Japan (BoJ) announced that it will explore the possibilities of a central bank digital currency (CBDC), also starting in 2023.
The CBDC pilot will be conducted in partnership with several large banks and run for two years, with the BoJ deciding in 2026 whether it will officially launch the digital yen.
Interest from the Japan central bank in CBDCs likely comes from their utility in cross-border payments, which also seems to be a motivating factor behind the planned loosening of stablecoin restrictions, with the report that announced the move stating, “if payment using stablecoins spreads, international remittances may become faster and cheaper.”
More will become clear once Japan’s FSA fully outlines any changes, but the agency has stated that further laws regarding anti-money laundering measures will be necessary to permit stablecoin distribution in Japan, and the local authority has also recently advised against using algorithmic stablecoins such as TerraUSD.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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