As the name suggests, Stablecoins are meant to be stable at $1. However, the latest UST crash has changed the way investors perceive them. Earlier, the idea was that stablecoins are mostly risk-free, but now the risks are quite imminent. Therefore, to ensure that investors are protected, Japan introduces a stablecoin bill. It is the first major economy to form a regulatory framework for them. We might soon see the United States and countries from the EU release their stablecoin framework as well.
The UST crash that pushed for stablecoin regulation
Luna and UST were among the most popular cryptocurrencies among investors. Luna was known for its applications and high demand that kept prices holding up even during a bear market. On the other hand, UST was an algorithmic stablecoin that provided 20% APY on Anchor Protocol. The fall of UST and the death spiral resulted in Luna falling by 100% and the stablecoin also losing 90% of its value. The crash is estimated at more than $50 billion and is one of the largest ones in the history of crypto. So, many people lost their money, and the need for a stablecoin regulation was clear.
Japan’s new stablecoin bill
The new bill classifies stablecoins as digital money. It also noted that the stablecoins must be linked to a legal tender and allow users to redeem them anytime. In Japan, stablecoins can only be released by registered banks, trust companies, or money transfer agents. This is also the reason that exchanges in Japan don’t list USDT or USDC. The law doesn’t clarify how these asset-based stablecoins will be interpreted.
Japan’s new bill will be implemented within a year, and the authorities will also be bringing more laws that govern the ones issuing these stablecoins. It reported that a popular bank, Mitsubishi UFJ Trust and Banking Corp, will be releasing its own stablecoin once the laws come to fruition. If that happens, it can easily become one of the most used stablecoins in Japan due to the lack of options. But then the question will be if they are able to provide attractive returns like the top players.
What are your thoughts as Japan introduces a stablecoin bill to protect investors? And do you think the United States will follow soon? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.