Japan Passes Stablecoin Law to Help Protect Investors

Japan became one of the first major global economies to introduce legislation for stablecoins, as it passed a law on Friday defining the cryptocurrency as digital money, according to a Bloomberg report Friday. 

Under the new definition, and backed by legislation that will come into effect in 2023, stablecoins must be linked to the yen or other legal tender and guarantee holders the ability to redeem them at face value. In addition, stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies. 

The bill passed by Japan's upper parliament on Friday, was first introduced in December 2021 and passed parliament in March. It completed the final step Friday which required majority approval from the House of Councilors plenary session. 

Prior to Friday’s vote, Mitsubishi UFJ Trust and Banking Corp outlined plans to release their own stablecoin called Progmat Coin. They also said their stablecoin would be fully backed by yen reserves, which would fall in line with the new law. 

While the new law outlines a regulatory framework for stablecoins within Japan, it did not address stablecoins issued by overseas companies like Tether. 

This law is the first law to be passed following the devastating collapse of Terraform Labs’ algorithmic stablecoin TerraUSD (USTC), formerly known as UST. This sent shock waves throughout the crypto world with even mainstream pundits chiming in, including U.S. treasury secretary Janet Yellen, who said the U.S. must introduce legislation by the end of the year to help protect investors. 

Furthermore, the U.K. came out with a consultation paper at the end of last month where it outlined a number of ways to reduce the risk of investors holding stablecoins. The European central bank also released a report requesting more regulation on all types of cryptocurrency. 

Lastly, South Korea recently said it is looking for more efficient ways to regulate the crypto industry, including regulating crypto exchanges. After all, a South Korean-report predicted that more than 280,000 South Koreans were affected by USTC’s collapse. 

Clearly, stablecoins are a hot topic in today’s global climate and especially after the TerraUSD debacle. While each country is going about regulation in different ways, it is clear that discussions on regulation are unfolding and it is only a matter of time before more countries and continents hope on board. 

Author: Tyler Irvin

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