Japan has passed a bill that would regulate stablecoin issuance to banks and trust companies, and subject them to strict rules. The move comes after the Financial Services Agency (FSA) issued new guidelines last month that was specifically aimed at preventing financial institutions from issuing digital assets like stablecoins.
The amended Payment Services Act (PSA) requires issuers of the so-called crypto assets to be registered as banks or trust companies, and those firms will be liable for any losses incurred by their customers.
A stablecoin is a cryptocurrency whose value is pegged to a stable asset, such as fiat currencies or precious metals. They are often used for remittance payments and international money transfers because they can be exchanged at the same rate of exchange across borders. Stablecoins are also popular in Japan because they can be used to avoid high bank fees when transferring funds between accounts.
The bill will allow banks and trust companies to issue stablecoins that meet certain requirements, including having their own dedicated blockchain, preventing them from being used for speculative trading purposes, ensuring that there are no third-party intermediaries involved in their transactions (i.e., no exchanges), and limiting the circulation of these coins within Japan’s borders only (they cannot leave Japan).
Japan Bill Aims To Protect Investors
The bill seeks to amend the Payment Services Act (PSA) and other financial regulations in a bid to prevent issues such as money laundering and capital flight using stablecoins. The proposed amendments, which have been submitted by Finance Minister Taro Aso and backed by Japan’s Financial Services Agency (FSA), would prohibit issuers from allowing customers who lost their private keys to recover their funds.
Under current law, there is no legal framework for dealing with such loss of private keys when using cryptocurrencies – leading many users to resort to third-party services that charge high fees for restoring access to their cryptocurrency holdings.