Japan Joins the U.S. to Regulate Stablecoins
According to Nikkei Asia, the FSA is planning to Propose the legislation in 2022, which would see only banks and wire transfer firms issue stablecoins. The report noted that the FSA was restricting stablecoin issuance as a means to protect users.
Stablecoins continue to grow in popularity, with an October 2021 data stating that the cumulative market capitalization of stablecoins by the largest stablecoin issuers is over $127 billion. This type of asset is pegged somewhat to sovereign fiat currencies such as the U.S. dollar.
However, regulators across the globe have expressed concern about the explosive growth of stablecoins, causing intense regulatory scrutiny on the sector. The United States has been vocal about regulating stablecoins, with issuers such as Tether and Circle coming into the spotlight.
In November, Senator Sherrod Brown, Chair of the U.S.Senate Committee on Banking, Housing, and Urban, sent a letter to stablecoin issuers such as TrusToken, Paxos, Tether, and Circle, and also major crypto exchanges Coinbase, Gemini, and Binance.US.
Some of the details of the letter included the number of tokens issued since inception and the minting process of the various stablecoins. The Senator also wanted to know the measures the companies put in place to protect investors. Meanwhile, USDC issuer Circle was earlier subpoenaed by the U.S. Securities and Exchange Commission.
Apart from the U.S., Europe is also looking to regulate stablecoins. Back in February, the European Central Bank (ECB) requested that European Union lawmakers grant the institution veto powers on stablecoin regulation. The ECB also recently brought stablecoins under the new PISA framework.
Meanwhile, the Japanese regulator is also planning to oversee wallet providers who deal with stablecoins.
“Intermediaries like wallet providers involved in stablecoin transactions and management will be brought under the agency’s oversight. They will also be required to meet obligations under Japan’s law on preventing transfers of criminal proceeds, including verifying user identities and reporting suspicious transactions.”
Consortium of Japanese Companies Planning to Launch Yen-Based Digital Currency
The latest development comes shortly after Japan announced the planned launch of a bank deposit-backed digital currency. The project which is called “DCJPY”, involves a consortium of about 70 Japanese companies.
According to the chief executive of cryptocurrency exchange platform DeCurret, Kazuhiro Tokita, the yen-based digital currency will utilize a common platform to accelerate “large-scale fund transfers and settlement among companies.”
Members of the consortium include financial institutional giants such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group. Others such as Nippon Telegraph and Telephone Corp, Japan Post Bank, East Japan Railway, Kansai Electric Poweralso form the consortium, with DeCurret leading the group.
Meanwhile, since 2020, the consortium has been exploring how to develop a common settlement platform for digital payments. The digital currency is expected to launch in fiscal 2022, with trials starting in the coming months.