According to The Nihon Keizai Shimbun, a financial newspaper that is one of the largest in the world and behind the Nikkei225 stock index, Japan’s Financial Services Agency (FSA) will propose legislation next to limit stablecoin issuance to banks and wire transfer companies. This would prohibit entities like Tether (USDT), a non-bank operating entity that is only regulated in British Virgin Islands, to conduct business with Japanese customers.
The new rules will only apply to some stablecoin issuers. In the face of regulatory restrictions, Circle USD Coin (USDC), a USD Coin (USDC), issuer, plans to chartered a US-based crypto bank. Stablecoin issuers operate as private businesses and are therefore exempted from financial reporting, auditing, or regulatory oversight. This has led to speculation that Tether might not have sufficient reserves to support USDT.
The FSA plans to also tighten regulations in areas like preventing criminal proceeds transfers, verifying user identities, and reporting suspicious transactions for stablecoin issuers as well as wallet providers.
Private stablecoins are not as innovative as central bank digital currencies. They compete directly with CBDCs and their adoption. The Japanese central bank is planning to launch the digital yen (the ‘DCJPY’) by the end next year. The consortium includes nearly 70 companies. These include the country’s biggest financial institutions. The ‘GYEN’ stablecoin digital currency is in circulation. A second launch is planned by Circle.