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Japan approves a stablecoin bill after UST fiasco
Strict regulations have been placed on the issuing of stablecoins by licensed banks, regulated money transfer providers, and trust businesses.
According to Bloomberg News, Japan has become one of the first big nations to pioneer stablecoin regulation after its government enacted a measure to rein in the industry.
The legal position of stablecoins has been addressed by the legislature. The new legislation defines stablecoins specifically as digital money. Effectively, the regulation restricts stablecoin issuance to licensed banks, registered money transfer providers, and trust businesses.
According to the new regulation, stablecoin issuers are required to peg their tokens to the Japanese yen or another legal money. Moreover, they must ensure token holders the ability to redeem their holdings at face value.
However, only stablecoin issuers within Japan are subject to these rules. Since Japan's crypto exchanges are not permitted to list stablecoins, the new regulation does not include prominent stablecoin issuers such as Tether and Circle.
A year from now, the law will take effect. However, Japan's primary financial regulator, the Financial Services Agency (FSA), stated that it will create regulations for stablecoin issuers within the next few months.
The UST debacle compels regulators to act swiftly.
When algorithmic stablecoin TerraUSD (UST) went bust, investors lost $60 billion, prompting the Japanese government to begin regulating stablecoins.
It was as a result of this that governments throughout the world began planning to control the $161 billion industry.
So yet, only the United Kingdom and the Republic of Korea have made public announcements about efforts to curtail the industry. Although the United States has not yet revealed its plans to regulate stablecoins, SEC Commissioner Hester Peirce has stated that the collapse of UST would push authorities to act quickly.
After UST and Terra (LUNA) started falling, institutional investors left ship according to Jump Crypto, a Terra-focused initiative. Retail investors, on the other hand, continued to purchase.
According to Cardano founder Charles Hoskinson, most institutional investors regard cryptocurrency like any other asset and sell it off when it underperforms, which is what Jump Crypto has now confirmed in public. Most ordinary investors, on the other hand, see the industry as a way to combat financial exclusion and hyperinflation in the long term.
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