The Financial Services Agency (FSA), Japan’s main financial regulator, is working on a legislative proposal to “ban” stablecoins such as Tether (USDT) and USD Coin (USDC).
In practice, the proposal to be launched in 2022 aims to limit the issuance of stable cryptocurrencies to banks and transfer companies.
As reported by the local Nikkei portal, the aim is to strengthen anti-money laundering regulations in the country.
Thus, Japan joins the US in the search for more restrictions on this segment valued at US$ 160 billion.
“To deal with the risks to users of stablecoins and to protect against stablecoin executions, legislation should require stablecoin issuers to be insured depositary institutions, which are subject to appropriate supervision and regulation at the level of the depository institution and the holding company” , US financial officials said in a recent report.
Stablecoins are cryptocurrencies generally backed by fiat currencies, with an emphasis on the US dollar. The biggest one is USDT, issued by Tether, whose current market value is around US$76 billion.
In general, stable digital currencies are considered the “league” of the cryptocurrency market. After all, they make it possible to trade cryptoactives with less volatility.
Despite this, this segment faces several challenges, both with regard to centralization and transparency.
Therefore, many regulators want to limit the use and issuance of these assets in their countries, as intended by the FSA.
By limiting stablecoin emissions, Japan’s FSA believes it can reduce the risk for cryptocurrency users.
Tightening of regulations
In addition to restricting the use of stable currencies, the regulator also intends to tighten regulations for intermediaries.
More precisely, the FSA wants to oversee portfolio vendors involved in stablecoin transactions and management.
These companies will be required to fulfill obligations under Japanese law on the prevention of transfer of criminal resources. Obligations include verifying user identities and reporting suspicious transactions.