Japan’s Financial Services Agency (FSA) is set to lift the ban on foreign-issued stablecoins in 2023.
The newly revised stablecoin act aims to regulate all virtual currencies and limit their issuance to banks and fund transfer companies, which can present collateral assets.
The FSA plans for stablecoins in Japan would give domestic entities the power to handle foreign stablecoin transactions based on existing guidelines for asset management and anti-money laundering measures.
The FSA remittance limit per transaction will reportedly be set at $7,500 (1 million yen). All local entities willing to engage in the management and distribution of stablecoins have been mandated to submit information about their users to the regulator’s feedback assessments exercise, billed to start after December 26.
The FSA, in a statement, said allowing the distribution of stablecoins in Japan come 2023 will require a lot of regulations, and the proposed feedback exercise will give the FSA the essential guide and insight.
How Japan treats crypto and stablecoins
In 2019, the FSA released guidelines for issuing and managing stablecoins. It established a framework for the regulation of stablecoins in Japan. The policies defined stablecoins as crypto assets pegged to fiat currency or other assets and outlined the requirements that stablecoin issuers must meet to operate in Japan.
In addition to these guidelines, the FSA granted regulatory approval to several stablecoin projects, including the issuance of the US dollar-pegged stablecoin, USD Coin (USDC) by Circle Internet Financial, and the issuance of the yen-pegged stablecoin, J-Coin, by Mizuho Financial Group.
However, in June 2022, following the devastating effects of the Terra (LUNA) collapse, the Japanese parliament passed a law for crypto investors’ protection. The law clarified the legal status of stablecoins and imposed its mandatory link to yen and face value management. The FSA also urged not to use algorithmic stablecoins.
As of Nov. 30, only 31 Japanese exchanges registered with the FSA were handling stablecoin trading.