Japan parliament passed a legal framework for clarifying the legal status of stablecoins


On Friday upper
house of Japan's parliament has passed a legal framework that clarifies the
legal status of stablecoins which specifies them as digital money.
This new
legislation will come into effect in 2023. As a result of the bill, stablecoins
would be defined as digital money that is linked to a legal tender, ensuring
the right of holders to redeem them at face value. Only licensed banks registered money, transfer agents and trust companies can only issue
Stablecoins with the FSA reporting that regulations governing stablecoin
issuers are to be introduced in the coming months. Existing asset-backed or
algorithmic stablecoins are not being existed by the bill. Coin holders must be
guaranteed that they would be able to redeem stablecoins at face value by linking
them to the yen or another legal tender as in Japan, stablecoins do not get
listed in exchanges.
The bill was
initially prepared by Japan's Financial Services Agency (FSA). The bill was
planned for late 2021 and in December 2021 it was first announced. Before being
approved by a majority, during the House of Councilor’s plenary session, it was accepted
by the House and passed Parliament in March. Now it has been passed by a
majority in the House of Councilors plenary session. The report said Japan is
among the first major economies to pass a stablecoin law, even if it takes
effect in one year. As per the report, this bill will provide a safety net for
investors in the wake of last month's terraUSD collapse that resulted in
multibillion-dollar losses.
Mitsubishi UFJ
Trust and Banking Corp frame out plans to issue Progmat Coin which is its own
stablecoin. Yen reserves from the trust account will fully support the
Tokyo-based bank's stablecoin. In contrast, the new law does not apply to
existing asset-backed stablecoins issued by overseas companies, such as Tether,
or their algorithmic counterparts.
U.S. Securities
and Exchange Commission (SEC) Commissioner Hester Peirce and U.S. Treasury
Secretary Janet Yellen, join a debate where the need for clear regulatory rules about
the use of cryptocurrencies and stablecoins was highlighted. At the beginning
of this week, the Bank of England wanted to have the ability to intervene to
oversee stablecoin.
Stablecoins are
cryptocurrencies whose value is tied to an external asset, such as the dollar
or gold, to stabilize their price

Indrani bose
CBW - External Analyst
INDIA