In a landmark event, on Friday, June 3rd, Japan’s parliament passed a law clarifying the legal status of stablecoins. The bill comes a month after the collapse of Terra’s UST stablecoin which led to multi-billion dollar losses.
Japan Legalizes Stablecoins
Japan becomes the first major economy to pass a legal framework around stablecoins.
The bill provides clarity around the definition of stablecoins, which rules that stablecoins are digital money.
According to the bill, stablecoins classified as digital money may now be issued only by licensed banks, registered money transfer agents, and trust companies.
Japan Places Emphasis on the Security of Crypto Investors
The ruling in Japan comes as part of a five-year effort to protect consumers investing in cryptocurrencies. As per the bill, holders of stablecoins now have the right to redeem them at face value.
Japan’s Financial Services Agency will devise regulations for stablecoin issuers in the coming months. However, the settled upon legal framework for stablecoins will only come into effect next year.
Ahead of the bill’s approval, Mitsubishi UFJ Trust and Banking Corp outlined plans to issue their own stablecoin, called Progmat Coin.
On the Flipside
- The bill does not address algorithmic stablecoins like TerraUSD, or exchanges in Japan that do not list stablecoins.
Why You Should Care
The historic move from Japan could potentially spur other countries into outlining legal frameworks for stablecoins.