Japan is moving forward on legislation regarding stablecoins, i.e. Digital assets that have their value tied to fiat currencies or stabilised by an algorithm.
According to Nikkei, Japan’s parliament passed a bill on June 3 that would ban stablecoin issuance by institutions other than banks.
According to the bill, stablecoins will only be issued to registered banks, money transfer agents and trust companies located in Japan.
New legislation introduces a system of registration for financial institutions that issue digital assets. It also provides protection against money laundering.
The bill, according to the report, aims to protect investors from the risks associated with rapid adoption of stablecoins. This was after the market grew to more than 150 billion yen (20 trillion yen).
According to reports, the new legal framework will be in effect by 2023. Japan’s Financial Services Agency plans to implement regulations for stablecoin issuers within the next few months.
Similar: The UK government proposes extra safeguards to protect against the risk of unstablecoin crashes
Japan’s stablecoin bill was issued in the wake of a huge decline in cryptocurrency markets fueled in part by the Terra tokens crash. In early May, the Terra USD algorithmic stablecoin (UST) lost its 1:0 value to the U.S. Dollar.
However, the stablecoin market turmoil was not limited to Terra blockchain. Other algorithmic stablecoins such as DEI also lost their dollar pegs and plummeted to $0.4 in May.