Algorithmic Stablecoins and Bitcoin in the same category: Japan’s FSA

In the third leg of Japan’s legal reforms, algorithmic stable coins will be in the same category as Bitcoin.
The issuer will now be licensed, deem them banks, trust companies, or fund transfer service providers.
These steps are taken to curb AML and CFT.

The land of the rising sun, Japan, is now working on “Regulating the crypto asset landscape in Japan” they published a report by the same name. Discussing three eras of legal reforms that the country had undertaken. Stablecoin regulation is a major part of the report.

Japan’s FSA (Financial Services Authority) is planning on categorizing the algorithmic stablecoin in the same bracket as BITCOIN. The issuers of these stablecoins will now need licenses that deem them a bank, a trusted company, or a fund transfer service provider.

The report allows banks can now issue stable coins as deposits. And says that self-claimed stablecoins, like TerraUSD, will be categorized similarly to BTC and non-redemption stablecoins.

These legal reforms started in 2016. In the first step, they are concerned with investor protection, CFT (Combating the Financing of Terrorism) and AML (Anti Money Laundering) regulations. The second reform started in 2019 and was expanded to cover investor protection, advertising and soliciting and derivatives trading.

The third reform will take place in 2022. Covering regulatory framework for banks, primarily stablecoins. Its priority being stablecoins are financial stability, AML/CFT and investor protection.

Trouble for Stablecoin issuers.

This third era will bring about major changes in the stablecoin market. The reform covers intermediaries, issuers, and CFD (Contract for Differences) transactions.

Issuers must follow the disclosure requirements and be classified as “crypto asset exchange service providers.” Intermediaries shall be “Electronic Payment Instrument Exchange Service Providers.” Issuers will also have a license that would deem them as a bank, fund transfer service provider, or trust company.

After the TerraUSD collapse earlier this year, governments worldwide are working on reducing such risks. And Japan’s regulators are keen on ensuring that stablecoins follow the rule book. This reform adds a comprehensive change to stablecoin in the land of the rising sun.

Japanese lawmakers are believed to follow FSA’s recommendations under strong consideration while establishing the policy. Japan has been boosting its regulatory actions and is keen on cooperating internationally. The Digital Ministry is set to launch a Decentralized Autonomous Organization to understand the technology.

Conclusion

Japan has always been leading the world in technology. And now they are about to lead the world in cryptocurrency reforms. Their latest step is welcome and shall help in much-required regulations. The reforms started in 2016 shall help censor money laundering activities and terror funding among the two dark spots in the crypto world.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing