New Legislation on Stablecoin Issuance
In a move that could reshape the crypto landscape, Japan’s Financial Services Agency (FSA) is looking to propose legislation that puts the brakes on stablecoin issuance. Set to debut next year, this legislation aims to limit stablecoin activities to banks and wire transfer companies only. By doing so, the FSA aims to put a damper on operations of entities like Tether (USDT), which currently lacks a robust banking structure and is primarily regulated from the British Virgin Islands.
Who Will Be Affected?
This proposed rule wouldn’t put every stablecoin issuer in the same boat. For instance, USD Coin’s issuer, Circle, appears to be taking a different route. By pursuing a crypto bank charter in the U.S., it aims to buffer itself from regulatory storms brewing across the globe. Meanwhile, others, like Tether, could face restrictions, adding another layer to its scrutiny given the whispers of its ability to back USDT with adequate reserves.
The Seriousness of Oversight
Under the new regulations, the FSA plans to enhance the level of scrutiny toward both stablecoin issuers and wallet providers. They’re stepping up efforts to thwart the transfer of criminal proceeds and are emphasizing the importance of identity verification and reporting suspicious transactions. In a world where crypto and crime often share a headline, this could be a very necessary regulatory approach.
Stablecoins vs. CBDCs
The competition heats up when you consider the relationship between private stablecoins and the burgeoning realm of central bank digital currencies (CBDCs). With the Bank of Japan gearing up to introduce the DCJPY, expected to launch by the end of next year, the stakes are high. Backed by a grand alliance of around 70 companies, including major financial institutions, the DCJPY aims to secure its position in an increasingly digital financial ecosystem.
Current Landscape of Japanese Stablecoins
As we stand, Japan does have some stablecoin activity underway. The GYEN is currently in circulation and captures some market attention. Moreover, with Circle’s backing, another stablecoin is courting launch as they attempt to ride the regulatory waves. These developments imply that even amidst potential restrictions, innovation in the stablecoin sector might not be completely stifled.
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