Japan Will Lift Its Ban on Stablecoins in 2023

Reports say that the Financial Services Agency of Japan will be removing the ban on foreign-issued stablecoins in 2023, allowing them for domestic distribution. Although, some cryptocurrencies like Tether (USDT) or USD Coin (USDC) may still be restricted.

Why Lift the Ban?

The currency's ability to be used in many other locations play a factor in lifting the ban. Once payment using stablecoins become more widespread, international remittances will become fast and cheaper, as mentioned in Cointelegraph.

Although, regulations in Japan will have policies in place, like trading stablecoins under the condition of asset preservation and upper limit resistance. This is a part of the country's new Revised Payment Services Act.

What Happens Now?

With the law, distribution will now be overseen by the people in charge of stablecoins in Japan. It means that local distributors or exchanges in the country will take charge instead of the issuer of the foreign stable coins.

There will also be limitations in place for the remittance of stablecoins. Each transaction will only be allowed a maximum of $7,500, and it will still be covered under the Anti-Money Laundering and Financing Terrorism control.

The Financial Services Agency has already started collecting public feedback on the proposals that aim to lift the ban, reports say. This is also in concern with the country's passed bill back in June 2022, which prohibits non-banking institutions from issuing stablecoins.

International cryptocurrency exchanges are now progressing within Japan and proceeding with their operations. The Japanese government has already issued a local exchange license to some crypto exchanges like Binance.

Cryptocurrency organizations will no longer have to pay taxes on paper gains brought by issued tokens. However, there are some precautions in place. The issuer will now have to provide collateral assets for security, according to Binance.

So far, none of the 31 local exchanges in Japan registered with the FSA are trading in stablecoins. However, BitFlyer, which is one of the 31 Japanese exchanges, trades in five cryptocurrencies like Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), XRP (XRP), and Stellar (XLM).

Why Are Stablecoins a Big Deal?

With the cryptocurrency market facing many problems this year, stablecoins are relatively more reliable. It was designed to maintain a stable price in the long run, ergo, its name. Its value is equivalent to an underlying asset like the US dollar, according to Forbes.

Cryptocurrencies can be volatile, which is a concern for some traders. Take FTX, for example, one of the biggest crypto firms in the market collapsing almost overnight, creating a vacuum that affected other cryptocurrencies as well.

Since stablecoins are basically pegged to the value of fiat currencies, it is not likely to be subjected to fluctuations in value like most cryptocurrencies get. In a way, it's like holding your fiat currencies in token form, and it is stored in the blockchain.

As mentioned by Modulus Global CEO Richard Gardner, Stablecoins are used to bridge the gap between fiat currency and cryptocurrency without volatility.