- The government may rule that only banks and electronic payment platforms are authorized to issue stablecoins.
- Crypto exchanges and wallets alike expect future regulations to be stricter.
- The Central Bank of Japan plans to launch the digital yen next year, following in the footsteps of other global issuances.
A proposal from Japan’s Financial Services Agency (ASF) looks to establish that the issuance of stablecoins is an attribute exclusive only to electronic payment platforms and banks, as part of a plan to increase the regulation of cryptocurrencies in the country.
If the proposal presented to the Japanese government by the ASF is approved, stablecoins such as USDT, the token of Tether Limited, will be directly affected from as early as next year.
Unlike other stablecoin issuers operating in the country, payment companies and other financial institutions governed by the Japanese regulator are required to comply with certain legal guidelines.
Fundamentally, the adoption of policies and procedures is in place to snuff out money laundering (AML), while also guaranteeing identification of clients (KYC). Likewise, operating institutions must have mechanisms that guarantee the protection of users’ funds.
The overall objective is that banks and electronic payment companies, including remittance transfers, reduce the risk of losses for their customers.
Although the Japanese government has been progressively increasing its regulations on crypto assets, two factors in particular have been attracting the attention of the authorities.
The primary concern is the sheer volume of money that moves in the cryptocurrency industry, particularly through stablecoins. On the other hand are operations which utilize the stablecoin Tether (USDT), whose market capitalization was around $ 78.4 million at the time of writing, according to CoinMarketCap.
On The Flipside
- The recent crisis at Chinese company Evergrande, and the ripples of tension it has sent reverberating through the markets, has set off alarms about Tether.
- The company has a strong backing in promissory notes and payment commitments with a certain date. However, Tether has clarified that it does not own Evergrande IOUs.
The Japanese regulator also has plans to introduce new regulations for digital wallets and other companies dedicated to financial intermediation with stablecoins.
Crypto exchanges are now believed to be caught up with ASF regulations as well, as reported by Nikkei Asia. The regulator hopes to adopt stricter measures in order to prevent money laundering through cryptocurrencies by use of USDT.
In this sense, authorized crypto platforms that receive, send or store stablecoins will have to comply with the new regulations, with identity verification and obligation to assist the authorities by reporting any suspicious operations being among them.
Although exchanges and digital wallets may continue to operate with stablecoins, should they comply with the requirements implemented by the ASF, the issuers of these cryptocurrencies could face some drawbacks, even if Tether Limited manage to comply with the standards set by the Japanese regulator.
Why You Should Care
- The Japanese government is pushing ahead with its plans to launch a bank deposit-backed digital currency in 2022.
- Since April of this year, the Central Bank of Japan has been testing the issuance of a digital yen, following in the footsteps of other central banks around the world.
- The main banks in the country, and some 70 companies and organizations from the financial sector, are slated to participate in the project.