The TerraUSD (UST) debacle is forcing major economies around the world to prepare legislation. Important news in this regard came from Japan. Japan is poised to become the first country to pass a law on cryptocurrencies and stablecoins.
Japan to recognize stablecoins as cryptocurrencies
On Friday, the Japanese parliament passed a stablecoin bill recognizing stablecoins as cryptocurrencies. Also, only stablecoins backed by yen or other legal cash will be recognized by law. However, asset-based stablecoins and algorithmic stablecoins such as Tether (USDT) are not included in the regulation. This mechanism was used on Terra UST and LUNA.
stablecoin law in preparation amid increasing adoption
Japan is one of the most crypto-friendly countries with individual and institutional investors increasingly adopting cryptocurrencies . According to Bloomberg, the Japanese Parliament passed a stablecoin law on June 3 that clarifies the legal position of stablecoins in the country while also recognizing them as cryptocurrencies.
According to the new law, only licensed banks, registered money transfer agents and trust firms will be able to issue stablecoins. Asset-backed stablecoins and algorithmic stablecoins from abroad, such as Tether, will not be included in the bill. Stablecoins will not be listed on Japan-based crypto exchanges.
The new law will go into effect next year
Additionally, Japan’s Financial Services Agency will soon create laws and regulations requiring stablecoin issuers to authorize stablecoins only from authorized banks and businesses. When the legislation goes into effect next year, Mitsubishi UFJ Trust and Banking Corp. aims to launch a stablecoin, Progmat Coin. Progmat Coin will be fully backed by the yen held in escrow. It will also provide amortization at face value.
As the use of crypto expands in Japan, the country seeks to protect investors in the unpredictable crypto market. As we covered in the news of Kriptokoin.com, the collapse of UST and LUNA triggered a huge sell-off in the cryptocurrency market. Tether, the largest stablecoin, briefly lost its dollar peg as a result of the meltdown. It has caused billions of dollars in losses for investors around the world and has encouraged governments to enact stablecoin rules.
Begins preparations for crypto and stablecoins in other countries
After the Terra ecosystem collapsed in early May, governments around the world are working on bills that govern stablecoins to protect investors. The US and UK are actively working on a stablecoin bill. Treasury Secretary Janet Yellen recently presented to Congress on a stablecoin regulatory framework. Meanwhile, the UK Treasury plans to pass stablecoin legislation to protect investors.
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