The Financial Services Agency (FSA) in Japan is said to be contemplating a new regulation in 2022 that will allow only banks and companies that deal with remittances to be able to issue stablecoins.
This is likely to be a setback for those companies that are dealing with stablecoins right now as this is likely to affect their business not only in Japan but the regulators from different parts of the world could take a leaf out of the FSA and follow similar processes in their respective countries as a means of limiting the growth and usage of stablecoins among the mainstream population. The stablecoins are likely to pose a big threat to the use of CBDCs which are likely to be issued by the various central banks in the coming years as they are tagged to specific fiat currencies and there are already billions of dollars worth of stablecoins in circulation now. The central banks would ideally like to control the spread of stablecoins as they don’t have any control over it and they are also unable to monitor the transactions involving them.
So the regulators are looking for ways to control its spread and this method adopted by Japan could set a template for others to follow in the months to come. Another reason for the regulators and the central banks to not like stablecoins is the fact that they view the stablecoins as a challenge to their digital currencies. Most of the central banks around the world are looking to launch their CBDCs but the presence of these along with stablecoins, which have got a headstart over the CBDCs, could be troublesome for the regulators.
Also, the stablecoins are owned by private entities over which the regulators do not have much control. This leads to a problem where the regulators would not be able to monitor the transactions made by different users similar to what they are doing now and this is likely to make them uncomfortable. So, by ensuring that stablecoins are issued only by those entities that are controlled by the government they are solving two problems as they would reduce the risk of the stablecoins not being supported by actual assets and at the same time, ensure that they would be able to monitor every transaction made through them.