Japan passes a StableCoin law to protect crypto investors

Japan has passed a trend-setting law that clarifies the legal status of stable coins and progresses in an international race to build security networks around the tokens whose binding to mainstream currencies underpins the broader cryptocurrency market.

The step of Japan, part of a five -year effort to protect consumers who invest in cryptocurrencies, followed the shock collapse of Terrausd in the past month, which triggered a debate about whether the tokens should be regulated, banned or left in peace

The Japanese Financial Service Authority had prepared regulations for stablecoins long before the market dissolved, and last year argued in a paper that was necessary for instruments with such significant potential effects on financial stability "a higher level of regulatory discipline".

The upper house of the Japanese parliament passed a bill on Friday, which essentially defines stable coins as digital currencies, imposed an obligatory bond with the yen and anchored it right to redeem it.

The legal structure will come into force in 2023, whereby the FSA will probably clarify the rules for stable coin emitters in the coming months. Analysts said that the legal framework could make it difficult for foreign players to enter the market.

According to the new legal definition in Japan, the issue of stablecoins is limited to banks, trustees and certain licensed money transference.

The step reflected the successful FSA's successful advance in 2017 that Japan is the first major economy to recognize Bitcoin as a currency. Shortly afterwards it was the first government to exhibit formal operating licenses for crypto exchanges.

Japan's official legitimization of Bitcoin triggered a significant early increase in its market value, although the enthusiasm of the FSA was steamed at the end of 2017 after customers of the Tokyo -based Stock Exchange CoinCheck lost $ 530 million in a digital robbery.

Before the approval of the draft law, Mitsubishi Ufj Trust and Banking Corp plans to issue their own stablecoin called Progmat Coin.

Japan's regulatory efforts were carried out during a global debate whether the regulations for stablecoins and other digital currencies should be tightened.

The collapse of Terra, which briefly lost its bond with the US dollar last month, sent shock waves through the global cryptoma markets and increased regulatory concerns.

In contrast to other, more volatile crypto tokens, including Bitcoin,

stablecoins such as Terrausd, a stable value memory compared to traditional currencies.

In a speech this week, Andrew Hauser, an official of the Bank of England, warned of the risks of keeping terrausd and other digital currencies and said that every stable coin that reaches a "systemic size" should meet standards that correspond to those of Cardon Bank money.

"In practice, this probably means that they are issued by a bank or a non -bank that is subject to strict regulation and supervision by the central bank," he said.