Japan passes Landmark Stablecoin Bill after Terra Debacle
Japan became the first country to pass a bill to legislate stablecoin to protect investors. The law came after investors incurred huge losses by the collapse of Terra Stable coin. Several countries are tightening laws around crypto investments. Japan is one step ahead by legalizing stablecoin.
According to a Bloomberg report, Japan’s parliament passed a bill on Friday that clarified the legal status of stablecoin as digital money. As per the new legislation, Stablecoin will be linked to Yen or another legal tender. It guarantees holders the right to redeem them at face value.
Licensed banks, registered money transfer agents and trust companies can only issue stablecoins. However, the law does not address other asset-based or algorithmic stablecoins. Japanese crypto exchanges do not list stablecoins.
The law is introduced in late 2021 by Japan’s Financial Services Agency however it will take a year to come into effect. The House accepted this in mid-march and has now passed by majority in the House of Councilors plenary session. FSA will introduce regulations governing stablecoins in the coming months.
Stablecoins are crypto assets backed by either a Fiat currency or other assets (gold)or even by algorithms. They remove the volatility associated with crypto assets through asset-backing and provide stores of value as well. This is the reason why stablecoins were very popular. However, with the recent crash of a popular algorithm based stablecoin TerraUSD, most of the experts are not sure about future of stablecoins.
Landmark Stablecoin Bill
According to experts and industry leaders, this type of regulation would provide better base for economic and technological development. The law would safeguard stablecoin holders while also giving them the freedom to enjoy and capitalize on numerous benefits of cryptocurrencies. Many countries are trying to regulate cryptocurrencies after the Terra crash.
United Kingdom has proposed stablecoin safeguards, strategies to reduce risk for stablecoin holders. The UK Government is in the midst of introducing regulations to mitigate consumer risks by regulating certain types of stablecoins. According to some changes recommended, Bank of England will receive power to appoint administrators to oversee insolvency arrangements with failed stablecoin issuers.
South Korean government will launch a Digital Asset Committee by the end of this month to oversee and assess the impact of stablecoin and provide better investor protection policies.
The law is a golden opportunity for banks and other financial institutions. Mitsubishi UFJ Trust and Banking Corp. has already announced its plan to issue its own stablecoin, Progmat Coin. Their stablecoin would be fully backed by Yen reserves and it will guarantee redemption at face value.
Terra community had approved for a hard fork last month after UST lost all its value. Terra 2.0 story is still unfolding, only time will tell how the new version would perform.
