A report from Monday, December 26th, indicates that the Japanese financial authority is planning to lift the ban on the domestic distribution of foreign-issued stablecoins in 2023. Currently, no exchanges registered in the country offer trading in stablecoins like USDC or USDT.

Japan to Allow the Distribution of Dollar-Pegged Stablecoins

According to a recent report, the Financial Services Agency (FSA) of Japan is planning to lift the ban on the distribution of foreign-issued stablecoins linked to “legal currencies such as the US dollar”. However, there are still doubts surrounding the effectiveness of recording transaction information and the Japanese watchdog believes that tighter anti-money laundering measures will be required after the lifting of the ban.

In June 2022, the Japanese parliament voted on a bill meant to further regulate stablecoins. The law, prompted in large part by the shocking collapse of LUNA, limited the issuing of stablecoins to banks, fund transfer service providers, and trust companies. Some of the restrictions imposed this summer are expected to be eased or lifted in 2023.

Additionally, despite the wariness caused by the fall of Terraform Labs, Japan has been looking to stimulate the cryptocurrency sector throughout the year. In August, FSA proposed tax breaks both for digital assets and individual stock investors. Furthermore, it was reported in October that the country was looking to relax its cryptocurrency listing process in the coming months. 

Stablecoin Scrutiny in the Aftermath of the LUNA Collapse

Japan wasn’t the only country to try and tighten its stablecoin regulation in 2022. Already in May, the government of the United Kingdom announced that it would speed up its effort to bring stablecoins under its regulatory framework as a part of its wide-reaching plans to regulate crypto activities.

In July, the European Central Bank published a report in which it highlighted the many risks associated both with stablecoins and cryptocurrencies in a broader sense. Late this summer, Singapore joined the countries looking to impose new restrictions on retail digital asset traders wishing to engage with stablecoins.

In September 2022, the United States House of Representatives introduced a bill aimed at prohibiting algorithmic stablecoins for a period of at least two years. Despite the numerous efforts to regulate this type of digital asset, the Financial Stability Board (FSB), an international body that monitors the global financial system, recently stated that no stablecoin meets its performance, resilience, and security recommendations.

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