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| Stable Cryptocurrency Faces Restrictions in Japan |
Japan is restricting the number of issuers of stablecoin cryptocurrencies (such as Tether) backed by reserves of currencies such as the US dollar or the yen in order to join the increasingly tight US control of more funds.
Stable cryptocurrencies are generally tied to fiat currencies to avoid the kinds of volatility associated with bitcoin and other digital currencies.
The Financial Services Authority plans to introduce laws in 2022 to limit the issuance of stablecoins to banks and remittance companies.
The debt crisis engulfing Chinese real estate developer Evergrande has once again drawn attention to the stability requirements of these cryptocurrencies.
Tethers hold most of the liquidity, backed in part by commercial paper, which are short-term corporate bonds. The company announced under scrutiny in September that it had not issued any commercial paper or other debt securities to Evergrande.
In a November report, US Treasury officials wrote: To address the risks and protect stablecoin users, legislation should require stablecoin issuers to be secure deposit institutions, subject to adequate supervision at the custody and holding levels.
The Japan Financial Services Authority believes that the restrictions on the issuance of stablecoins by banks and remittance companies are a way to protect legally authorized customer assets to reduce the risk of coin users.
In October 2021, the market cap of stablecoins issued by the largest issuer of stablecoins exceeded $127 billion.
Japan limits the number of stablecoin issuers
The Japan Financial Services Authority is also tightening regulations to prevent money laundering. Brokers, such as portfolio providers involved in stablecoin transactions and management, are subject to institutional oversight.
They must fulfill their obligations under the Japanese Law for the Prevention of Diversion of Proceeds of Crime. This includes verifying the identity of users and reporting suspicious transactions.
Stablecoins have potential benefits for businesses and consumers. This allows transfer of funds and payment of purchase fees with very low transaction costs.
The new digital currency with bank deposits is expected to reach the market in Japan as early as 2022. The country's largest bank and about 70 other companies and institutions participated in the work.
This currency, which we can call DCJPY, is designed to speed up the transfer of large amounts of money between businesses.