Japan remains cautious about granting authority to banks for issuing stablecoins, except for established trust banks.
The Financial Services Agency (FSA) of Japan recently presented its ideas on cryptocurrency and stablecoins to the Financial System Council Working Group on Payment Services. The presentation focused on the potential for licensed deposit institutions to issue stablecoins on permissioned blockchains, while maintaining a cautious stance towards stablecoins on permissionless blockchains.
Since the enactment of the stablecoin legislation in 2022, Japan has supported the issuance of stablecoins by banks, licensed money transfer companies, and trust companies. However, the FSA has expressed concerns about stablecoins issued on permissionless blockchains. This caution extends to stablecoins issued by licensed deposit institutions on such blockchains.
On the contrary, the FSA is comfortable with all stablecoins existing on permissioned blockchains. In fact, the FSA is considering allowing licensed deposit institutions to issue stablecoins on permissioned blockchains. This could potentially lead to a relaxation of reserve requirements for stablecoins issued by trust banks on permissioned blockchains.
The FSA's working group continues to focus on the distinction between stablecoins issued on permissioned and public blockchains. The FSA plans to impose the travel rule on trust bank issued stablecoin transfers on permissioned blockchains, requiring Know Your Customer (KYC) for these transfers. Additionally, the FSA wants to impose the travel rule on trust bank issued stablecoin transfers on permissioned blockchains.
It's worth noting that since 2022, SBI Holdings in Japan has received the license to issue stablecoins on open blockchains. However, the FSA's stance on stablecoins issued on public blockchains remains wary, as expressed in previous presentations.
The FSA did not discuss any potential changes to the 2022 stablecoin legislation in its recent presentation. The FSA's stance on stablecoins issued by banks, licensed money transfer companies, and trust companies remains supportive, as established by the 2022 legislation. The FSA did not express any new concerns about stablecoins existing on permissioned blockchains.
In summary, the FSA is cautiously exploring the potential for licensed deposit institutions to issue stablecoins on permissioned blockchains, while maintaining a wary stance towards stablecoins on permissionless blockchains. The FSA continues to focus on the distinction between stablecoins issued on permissioned and public blockchains, with a particular focus on imposing KYC and travel rules on trust bank issued stablecoins on permissioned blockchains.
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