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December 7, 2021

Japan eyes new legislation to control stablecoin issuance

By Shalini mani

Japan’s Financial Services Agency (FSA), the country’s financial watchdog, is reportedly looking to propose a new regulation in 2022 to limit stablecoin issuance to banks and wire transfer companies.

The aim is to strengthen oversight in the market in order to shield consumers from risks associated with asset-backed stablecoins, Nikkei Asia reported.

By restricting its issuance to bank and wire transfer companies that are bound to protect customer assets by law, the FSA intends to minimise risk for stablecoin users.

As part of its efforts to prevent money laundering, the agency is expected to bring wallet providers and others involved in stablecoin transactions and management under its watch.

It will require such players in the stablecoin market to follow certain norms, including verifying user identities and reporting suspicious transactions.

Furthermore, Japan is expected to introduce a new bank digital currency backed by bank deposits over the course of next year.  This currency is being developed by the country’s leading banks and around 70 other companies and organisations.

Meanwhile, Japan’s proposal to limit stablecoin issuance comes shortly after a similar move in the US.

Last month, the US Treasury Department called on Congress to put in place a new law that would restrict the issuance of coin solely to banks.

The same month, the European Central Bank approved a new oversight framework for electronic payments, which would incorporate crypto currencies and stablecoins.

In 2019, the European Council and European Commission said that global stablecoin arrangements cannot run in the EU unless all associated risks have been addressed.

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