Japan’s financial regulator is seeking feedback on allowing domestic distributors to handle stablecoins issued outside the country on the condition that they maintain sufficient collateral.
The new regulations will be part of the revised Payment Services Act which will come into effect this year. If approved, it would allow Japanese exchanges to list and trade popular stablecoins like Tether (USDT) or USD Coin (USDC).
The legal revision primarily introduces a registration system for stablecoins circulation and reinforce anti-money laundering measures. Additionally, it enables overseas businesses to issue stablecoins in the country through custodians of digital assets.
Japan’s parliament passed a bill in June 2022 to regulate crypto tokens whose value is pegged to that of the yen, dollar or other currencies. The new law is aimed at curbing financial system risks of stablecoins and strengthen protections for investors.
Under the new law, stablecoins can be issued by licensed banks, registered money transfer agents and trust companies. Stablecoin licenses are expected to be issued only to highly credible businesses in charge of issuing and managing them, as well as intermediaries responsible for circulation.
The Japanese watchdog has repeatedly voiced doubts surrounding the anti-money laundering measures. As a result, none of the 31 Japanese crypto exchanges registered with the FSA list any stablecoins.
The news comes hot on the heels of San Francisco-based cryptocurrency exchange Kraken halting its trading services for Japanese residents, nearly two years after it re-entered the lucrative market when regulators stepped up oversight in the country.
Kraken has decided to cease its operations in Japan and deregister from the Financial Services Agency (JFSA) as of January 31, 2023. Explaining the rationale behind its second exit, the company cited current market conditions in Japan in combination with a weak crypto market globally. As such, the resources needed to further grow their business in the country aren’t justified at this time, the company wrote in a blog post.
Kraken’s Japanese clients have until January 31, 2023 to withdraw their fiat and crypto holdings. They can also withdraw their balances to an external wallet or liquidate the portfolio and withdraw the value in fiat to a domestic bank account.