Stablecoins also targeted by Japanese regulators
The Japanese government aims to strictly regulate stablecoins because some officials believe they pose a danger to the country’s financial stability. Japan has a restriction on the number of cryptocurrency issuers.
This is true for services like Tether, which are backed by reserve assets such as the dollar or the yen. As a result, the Japanese economy has joined the concepts that have already been established in the United States. These principles are intended to strengthen limitations in the ever-expanding financial sector. Simultaneously, the Bank of Japan is attempting to create a digital yen, which it sees as a safer alternative to private virtual currencies.
What is stablecoin?
Stablecoins are digital currencies that have the same attributes as fiat money. They are often tied to the dollar or euro exchange rate, gold, or other assets, including cryptocurrencies. Stablecoins were initially used by cryptocurrency users to save money in the case of a market crisis. If bitcoins grew more affordable, traders might exchange them in a couple of minutes without incurring losses. Without stablecoins, we would have to convert bitcoins or other cryptocurrencies into fiat. Sometimes such transactions are not available on all platforms, and often involve significant costs.
Tether is one of the more successful stablecoin examples. As a result, it has become a target of the Japanese government, which penalized the creators moreover $41 million in October. What is the reasoning? The developers stated that the coins were secured 1-to-1, but they were never totally guaranteed.
Japan increases control over digital assets
According to Reuters, three Japanese officials have stated that the government intends to increase control over digital assets. Some local observers, according to the report, feel that stablecoins, a type of cryptocurrency linked to fiat currency, might disrupt Japan’s financial sector. It is worth noting that in July 2021, Japan’s Financial Services Agency (FSA) established a section to supervise digital currency legislation. Furthermore, the Ministry of Finance was contemplating raising the resources needed.
According to sources, the possibility of stringent regulation might benefit Japan’s central bank. The institution has already begun experimenting with the issuance of its own CBDC, believing it to be a better and safer alternative to private crypto assets. It has started a testing program to see if such a solution is technically feasible. Consequently, the project consists of two stages, the first of which has already begun and will be finished by March 2022. At the time, Bank of Japan executive director Shinichi Uchida stated that launching tests at this level was a necessary step.
A yen-based cryptocurrency is coming
However, not only is Japan considering stringent laws for stablecoin issuers. Treasury Secretary Janet Yellen has requested that the United States’ crypto-asset regulators begin regulating stablecoins. Since then, the President’s Financial Markets Working Group (PWG) has suggested that stablecoin issuers be subject to banking-style supervision.
Meanwhile, the Japanese government intends to establish a yen-based cryptocurrency in 2022. The hypothetical DCJPY, will be backed by bank transactions and should speed up the movement of vast amounts of money between companies.
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Valentyna Bereza, Team bit4you.