Japan Advises Against Stablecoins Algorithmic Backing
Japanese regulators are thinking about completing their historic stablecoin law by limiting the algorithmic backing of stablecoins. The Financial Service Agency (FSA) has recommended this, and Tomoko Amaya, the nation’s vice minister for international affairs, has reaffirmed it.
Amaya outlined Japan’s regulatory framework during his speech on cryptocurrency assets at a roundtable organized by the Official Monetary and Financial Institutions Forum (OMFIF), putting a focus on the elements of financial stability, user protection, and anti-money laundering/countering the financing of terrorism (AML/CFT). The speech was originally held in November, but the FSA published the full document on Dec 7.
Japanese regulatory landscape couldn’t discover anything new
The Banking Act, the Payment Services Act, and the Financial Instruments and Exchange Act, three important pieces of legislation, together make up the 29-page presentation that systemsatizes the Japanese approach to cryptocurrency regulation. The emphasis on distinguishing between “crypto assets” and “digital-money type stablecoins” gives a novel viewpoint on the local regulators’ approach to the latter, but one familiar with the Japanese regulatory landscape couldn’t discover anything new at this time.
Additionally, Amaya’s speech makes no mention of any specific deadlines or general themes for upcoming legislation. The Vice Minister does, however, refer to the FSA suggestions, which were allegedly made in October, in the “Way Forward” section towards the end of the document. The quote reads:
“The proposed review states that ‘global stablecoins must not use algorithms in stabilizing their value’ and strengthens the ensuring of redemption rights.”
Given that algorithmic stablecoins are not covered by the existing stablecoins policy, which was approved by Parliament in June and will go into effect in June 2023, MPs will likely take this suggestion into account in the future. The cryptocurrency markets experienced a sharp decrease following the collapse of the Terra tokens, which led to the algorithmic stablecoin Terra USD (UST) losing its 1:1 value to the US dollar in early May. This contributed to the passage of the bill itself.
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