With the Japanese parliament passing a bill establishing the legal status of stablecoins, Japan becomes one of the first large nations to establish a legal framework for stablecoins, basically designating them as digital money to safeguard the investors.
As per the new law, stablecoins must be tied to the yen or another legal tender and guarantee holders the ability to redeem them at face value.
According to a Bloomberg report, stablecoins can only be issued by licensed banks, registered money transfer agents, and trust firms, per the new law.
The existing asset-backed stablecoins from foreign issuers like Tether, as well as their algorithmic counterparts, are not addressed by the new law.
The new legal framework will enter into force in 2023. Other than that, just last December, Japan’s FSA proposed new regulations on stablecoin issuers to tighten the institution’s influence on the stablecoin market which is set to come into effect this year.
Once the law is established completely, Mitsubishi UFJ Trust and Banking aims to issue its own stablecoin, named ‘Progmat Coin’. The bank stated that the token will be fully backed by yen held in a trust account and that redemption at face value will be assured.
Japan’s new law framework comes after the dramatic collapse of TerraUSD last month which sparked a debate about whether the tokens should be regulated, banned, or just ignored.