Japan Eases Stablecoin Rules
Japan Eases Stablecoin Rules: Increased Flexibility, Reduced Burden
Japan is making significant strides in its approach to stablecoins and crypto transactions. The Financial Services Agency (FSA) has approved a report recommending substantial changes to current regulations, aiming to enhance financial flexibility while safeguarding user assets.
Key Regulatory Changes
The proposed modifications impact two key legislations: the Trust Business Act and the Payment Services Act. The changes address concerns raised by local crypto businesses regarding restrictive safety measures. Key updates include:
- Expanded Stablecoin Backing: Stablecoin issuers will gain the ability to use short-term government bonds and fixed-term deposits alongside demand deposits to back their stablecoins. However, these new assets cannot exceed 50% of the total backing.
- Simplified Intermediary Requirements: The introduction of "intermediary business" simplifies compliance for firms facilitating crypto transactions but not holding client assets. This reduces the regulatory burden on businesses, such as game firms and digital wallet providers, fostering market entry.
- Streamlined Registration: Crypto exchanges and issuers will remain subject to stringent security requirements, but the registration burden is significantly reduced for intermediaries who don't manage client assets.
These changes follow extensive discussions by the Financial System Council from August 2024, analyzing payment service operations, remittances, and stablecoin standards.
Impact and Implications
The FSA's approval signals a move towards a more accommodating regulatory environment for stablecoins in Japan. This could lead to:
- Increased innovation: Easier entry for new businesses in the crypto space.
- Enhanced financial flexibility: Improved capital management for stablecoin issuers.
- Greater competition: A more dynamic and competitive marketplace.
The FSA plans to implement these legal changes, revising the Trust Business Act and amending the Payment Services Act. Finance Minister Katsunobu Kato supports this initiative, emphasizing the need for a secure and efficient digital payment system.
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