Japan passed a bill Friday (June 3) that outlines a legal fabric for stablecoins that effectively defines them as digital currencies, the Financial Times (FT) reported. The country is among the first major economies to launch a legal framework around stablecoins.
Japan’s proposed legislation states that stablecoins must be linked to the yen or another legal tender and guarantee that holders can redeem them at face value, according to the report. The bill also indicates that stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies.
See also: Emerging Markets See Stablecoins as Viable Alternative to Bitcoin
The new legal framework is slated to take effect in a year. Japan’s Financial Services Agency said its regulations governing stablecoin issuers will be released in the months ahead, according to multiple media reports.
Mitsubishi UFJ Trust and Banking Corp. is reportedly issuing its own stablecoin — Progmat Coin — once the legal framework is in place, per reports. The token will be fully backed by a yen that’s placed in a trust account guaranteed redemption at face value.
Government agencies worldwide are trying to nail down legislation around stablecoins, which is a cornerstone of the cryptocurrency industry. Stablecoin TerraUSD’s freefall and unpegging from the U.S. dollar led to multibillion-dollar losses.
Read also: Breaking the Buck May Break Faith in Currency-Pegged Stablecoins
The implosion of the TerraUSD has left many critics of the supposedly safe branch of crypto, which many regulators and central bankers fear is a threat to global financial stability.
See more: $45B Stablecoin Rout Confirms Worst Fears about Crypto’s Need for Reserves
This week, U.K. Treasury launched a consultation proposing an insolvency regime for digital assets, and in particular for systemic stablecoins. The recent events with TerraUSD have highlighted the need for appropriate regulation to mitigate consumer and financial stability risk, the government said.
Read more: UK Government Wants Bank of England to Regulate at-Risk Stablecoins
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