Stablecoins that do not rely exclusively on a fiat currency have been temporarily banned in Japan, however, the Prime Minister’s vision is about to turn the tables and enable the rest of stablecoins as well, among which, stands out Tether which previously had received a ban.
Historically, Japan has always had a shielded position with respect to the cryptocurrency world but, over time, this position has been softening.
Six months ago, with the aim of regulating such a new and complex sector, Fumio Kishida‘s cabinet team initiated an ad hoc bill on stablecoins.
The Japanese government specified that stablecoins as well as other cryptocurrencies are neither more nor less digital money and therefore should be treated as such.
With this legal framework, Kishida’s country stands as one of the first countries in the world to have legislated on stablecoins.
In essence, the legal text endorses the use of stablecoins as long as they are backed by the Japanese yen or any fiat currency around the world so that those who own them can spend their nominal value.
As for who will be allowed to issue these digital currencies, in this specific case stablecoins, the government dictates that the option will be reserved for banks, fund transfer service providers, and trust companies.
Those who will issue and/or distribute stablecoins will be subject to stringent specific anti-money laundering regulations that require the recording of sensitive user data, as specified by the FSA on the sidelines.
However, the regulatory framework did not take into account all stablecoins that are backed by assets and certain exceptions such as Tether (USDT) throwing the rock for a discussion on the issue.
Japan and the ban on Tether and USDC stablecoins
During the election campaign, Prime Minister Fumio Kishida promised citizens what he called “New Capitalism” or the promotion of tools and stimulus aimed at getting the economy of the little big country moving again.
Part of the government’s policy has been to promise citizens to double their wealth and to fulfill this mission a valuable ally is certainly the new markets that are emerging.
The country’s open stance toward new digital assets (crypto), NFTs and the Metaverse is on the rise and is increasingly targeting these markets.
Kishida recently stated the following in an interview:
“Developments related to the metaverse and NFTs will also be part of the nation’s growth strategy going forward.”
In addition to NFTs, Metaverse, and Crypto, Japan has indicated that it will support all those businesses operating in Web3 from here on out.
Taxes are the other big issue Kishida is focusing on; the executive is working to slow the grip of taxation on cryptocurrencies from a financial freedom and capital movement perspective.
The Financial Services Agency (FSA) is advocating a bill whereby all those companies that earn income as they issue cryptocurrencies should be exempt from paying taxes as they in turn generate value and opportunity for millions of Japanese.
Both companies and individual investors will enjoy benefits since the proposed law also touches individuals through the enhancement of some tax breaks already in place in the country.
However, the news that is making headlines among both local and non-local investors is the fact that the Financial Services Agency (FSA) will retrace its steps regarding stablecoins not based on fiat currencies.
The ban will be lifted on digital currencies such as Tether and USDC, but with exceptions to how other stablecoins are treated.
For the FSA, Tether will be able to be purchased by Japanese users but will not be able to be traded, at least between entities that are citizens of the Asian country.
In this regard, Coins Paid reported that:
“In 2023, the Financial Services Agency will lift the ban on domestic distribution of overseas-issued stablecoins.”
In addition to the inability to be exchanged, Tether will also have limitations on holdings in wallets.
The report states that a maximum of $7500 (1 million Japanese yen) will be allowed to be held in the wallet.
Meanwhile, Tether is down 0.0017% today but such fluctuations are the order of the day for such a stable currency.