In Japan, Parliament has passed a law clarifying the legal status of stablecoins, beginning to build the new legal framework for digital currencies that will come into effect within the next year.
Japan: new law on stablecoins and the coming legal framework
According to reports, the new law passed in Japan on Friday defines stablecoins as digital coins that must be tied to the yen or another fiat currency, granting holders the right to redeem them at face value.
This is a first step by the Japanese Parliament towards building a proper legal framework on stablecoins that will come into effect within a year. In fact, the Japanese Financial Services Agency has stated that it will introduce legislation regulating issuers of stablecoins in the coming months.
Not only that, the legal definition emphasizes that stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies.
The new law is not applicable for existing stablecoins secured by assets of foreign issuers such as Tether (USDT), or their algorithmic counterparts. In addition, crypto-exchanges in Japan do not currently list stablecoins.
Japan: Mitsubishi UFJ Trust and Banking Corp will issue its own stablecoin
As soon as Japan’s new stablecoin legal framework is ready, Mitsubishi UFJ Trust and Banking Corp. appears to have already declared that it will issue its own stablecoin, called Progmat Coin.
The bank, a unit of Mitsubishi UFJ Financial Group Inc. reportedly said the token will be backed entirely by yen deposited in a trust account and will guarantee redemption at face value.
With this move, Japan joins all the economies that are preparing to erect protective barriers around stablecoins, following last month’s TerraUSD collapse, which led to multi-billion dollar losses.
Governments protect themselves from stablecoins
In the face of huge investor losses from the collapse of UST and Luna, governments have moved to protect themselves from stablecoins.
In addition to Japan today, the UK is also aiming to anticipate, where possible, and avoid in practice the problems arising from possible cryptocurrency and stablecoin crashes.
By 2 August, the UK Treasury is to issue a document to give the UK Central Bank more powers to investigate stablecoin issuers more closely and improve existing regulations.
In contrast, South Korea wanted to act more heavily by placing Do Kwon, founder of Terra Luna, under investigation by the Seoul Southern District Prosecutor’s Office.