Japan intends to allow local investors to trade foreign stablecoins, such as USD Coin (USDC) or Tether (USDT), by the end of the second quarter of 2023 at the latest, The Financial Services Agency (FSA) reported.
Stablecoins and Japanese Ban
However, the FSA is unlikely to allow all foreign stablecoins, and the final list is still unknown. A spokesperson for the FSA told Cointelegraph that restrictions may still be imposed on some of them.
The Japanese regulator will conduct its own compliance checks to confirm that stablecoins will be safe for local users. Ultimately, the most popular ones could not be allowed to enter the market. However, Details on the matter have not been provided.
"The FSA does not provide any opportunity to access such information before the decision is made," a spokesperson for the regulator said.
It was first reported that Japan would loosen stablecoin regulations in late 2022. At the time, local media outlets suggested that the regulators would allow foreign stablecoin trading while maintaining a cap on remittances and asset preservation by deposits.
Watch the recent FMLS22 panel on the current crypto winter.
Japan Loosens Stablecoin Regulations after Tightening Too Much
A bill restricting the issuance of foreign stablecoins was enacted in June 2022, requiring issuers to peg the tokens to the Japanese yen. The legislation is expected to finally go into effect in 2023, but it has already changed the picture of the local cryptocurrency industry.
None of the 31 FSA-registered cryptocurrency exchanges has since offered stablecoin operations. In 2021, the FSA led the discussion on stronger industry regulation while preserving room for further development of cryptocurrency projects. In the case of the stablecoin market, the proposed regulatory changes have proved to be too strict.
More importantly, some exchanges, including Kraken and Coinbase, have decided to leave the country, explained by the weak cryptocurrency market. However, the loosening of regulations may encourage some players to return. In September, it was reported that Binance, one of the largest cryptocurrency exchanges, is seeking to re-enter the Japanese market after four years of absence.
