Japan lifts the stablecoin ban, signaling a significant turning point in the country’s cryptocurrency landscape. The move comes after months of deliberation and collaboration between regulators, financial institutions, and industry experts. As the ban is lifted, Japanese banks are gearing up to embrace the stablecoin revolution and capitalize on its numerous benefits.
Stablecoins are cryptocurrencies designed to minimize price volatility by pegging their value to an external asset, such as a fiat currency or a commodity. This stability makes them an attractive option for both individuals and businesses looking to transact in cryptocurrencies without exposure to the volatile nature of mainstream cryptocurrencies like Bitcoin or Ethereum.
New Regulations demand Asset Backing verification for Token-Issuing Firms
At the stroke of midnight on June 1, 2023, the revised Payment Services Act came into effect. According to the new regulations, Japan lifted the Stablecoin ban, and all firms involved in token issuance are now required to provide verifiable evidence of the underlying assets supporting their cryptocurrencies.
Restricted to regulated entities, including banks, fund transfer service providers, trust companies, and other financial institutions, the issuance of these coins is now exclusively allowed. Furthermore, in adherence to new anti-money laundering regulations, distributors are obligated to maintain comprehensive transaction records.
However, banks are believed to show a strong interest in entering the stablecoin market. Kondo Hidekazu, from GU Technologies, which offers stablecoin technology to regional banks like Shikoku Bank, was quoted in the Nikkei newspaper expressing this sentiment. He stated: “Many regional banks are considering issuing stablecoins.” According to industry insiders, financial services providers are considering the possibility of introducing their own “digital community currency.”
What motivates Japanese Banks to pursue Stablecoin Issuance?
The media outlet CoinPost reported that the removal of the de facto ban on domestic stablecoin issuance is anticipated to enhance payment efficiency for both domestic and international transactions among companies in Japan.
Market experts estimate the value of the business-to-business (B2B) payments market to be approximately $7.2 billion. As per the report by CoinPost, a Japanese media outlet: “If [Japanese] stablecoins lead to an increase in global transactions, it may become easier [for issuers] to earn fees by facilitating payments between multinational companies.”
Versatile Applications: Stablecoins in International Remittances and Online Shopping
According to experts, stablecoins have the potential to be utilized in international remittances and online shopping sectors. The recently enacted law emphasizes the fundamental distinctions between crypto assets and stablecoins.
The legislation specifies that algorithmic or crypto asset-backed “stablecoins” do not fall under the category of stablecoins. Additionally, comprehensive guidelines have been established to ensure user protection and regulatory compliance. Token issuers will have the responsibility to implement measures enabling them to suspend the transfer and redemption of payments to wallets that are not under their management.
This development is expected to generate significant interest among Japanese megabanks such as Mitsubishi UFJ. Mitsubishi UFJ, along with its partners, initiated a stablecoin interoperability pilot project in March, indicating their proactive engagement in this area.
The governor of the country’s central bank has expressed positive views on stablecoins this year. The bank’s leader emphasized that stablecoins have the potential to “co-exist” alongside central bank digital currencies (CBDCs).
As Japan lifts the stablecoin ban, it is a significant milestone for the country’s cryptocurrency industry. With regulated banks now able to issue stablecoins, there is a notable shift towards embracing the benefits they offer. The revised Payment Services Act and stringent anti-money laundering rules ensure transparency, security, and consumer protection within the stablecoin ecosystem.
Japanese banks are eagerly preparing to leverage stablecoins to enhance efficiency in cross-border transactions and tap into the unbanked population. The versatile applications of stablecoins in international remittances and online shopping sectors add to their appeal.
Japan’s progressive stance on stablecoins sets a precedent for other countries and encourages global adoption. The emergence of stablecoins complements the ongoing development of central bank digital currencies, offering potential coexistence and a diversified digital financial landscape.