Japan Moves to Liberalize Regulations for Stablecoins and Crypto Brokerages

Japan is moving to liberalize regulations for stablecoins and crypto brokerages through a bill proposing an amendment to the Payment Services Act.

Japan is moving to adjust regulations for stablecoins and crypto brokerages through a bill proposing an amendment to the Payment Services Act, according to a report by CCXV.

The nation’s Cabinet has approved the bill, which will now proceed to the National Diet for discussion and voting. The reforms would offer more flexibility for stablecoin issuers and establish a separate regulatory regime for crypto brokerages.

The Financial Services Agency (FSA) forwarded the bill to the Diet on the day of Cabinet approval. Previously greenlighted by the FSA, the plan is meant to simplify crypto companies’ entry into Japan’s market.

The bill introduces new regulations for stablecoin issuers, allowing them to collateralize their tokens with a wider variety of assets. Earlier, the issuers were mandatorily keeping a 1:1 cash deposit in accounts of regulated banks. Now, they can collateralize using Japanese and American government bonds as long as those bonds have a three-month maturity or less. Yet, bonds may only constitute a maximum of 50% of a stablecoin’s reserve holdings, with the remainder stored in current accounts.

Another significant provision of the bill is the creation of a new intermediary class for crypto brokerage companies. Brokerage companies are currently subject to the same registration standards as crypto exchanges, such as acquiring a virtual asset service provider license. The new regime would impose dissimilar obligations on intermediaries and subject them to compliance and anti-money laundering regulations in contrast to exchange-regulated obligations.

The Diet must pass the legislation through the legislative process before it can be signed into law. An appropriate committee will study and possibly amend it before a chamber votes on it. Once the House of Representatives and the House of Councillors approve it, officials will submit it to the Emperor for formal promulgation, thereby implementing the reforms.

These reforms are in line with Japan’s ongoing bid to foster a more inclusive digital asset regulatory landscape with sufficient financial stability and protection of consumers in place. On implementation, the bill would pave the new opportunities for crypto companies in one of Asia’s most sophisticated digital asset economies.