Japan Could Reverse Ban on Foreign Stablecoins

Japan is reportedly readying regulations that would let foreign stablecoins list on the country’s exchanges.

According to a Monday (Dec. 26) report by Japan’s Nikkei newspaper, the country’s Financial Services Agency (FSA) is asking for feedback on the new regulations, which will let local distributors handle payments-focused stablecoins. 

The regulations could reverse a ban on the distribution of foreign stablecoins locally. Currently, Japan’s exchanges don’t list stablecoins such as USD Coin and tether. The FSA has given the public until Jan. 31 to comment on the new regulations, which will go into effect next year.

Japan in June became the first major world economy to formally define stablecoins’ legal status, classifying them as a form of digital money — a privately issued currency. 

Regulations adopted then say stablecoins must be linked to a legal tender and guarantee that holders can redeem them at face value. It also mandates that stablecoins can only be issued by licensed banks, trust companies and registered money transfer agencies.

This move was prompted by the collapse of the terraUSD stablecoin and its sister token LUNA, which wiped out $45 billion in investments and led to a call for more regulations.

The new regulations come one week after reports that Japan was preparing to lower its 30% tax on crypto holdings. 

In August, the FSA said that businesses should receive exemptions from paying taxes for paper gains on crypto that they hold after issuing them while calling for more support for a program that gives tax breaks to individual investors.

Under the current system, the profit from crypto holdings, unrealized gains included, incurs a corporate tax of around 30%, making it costly for companies to hold on to digital coins once they’ve been issued.

And some companies say high taxes have driven them to take their operations to Singapore. Among them is Web3 infrastructure firm Stake Technologies, whose CEO earlier this year also called for reducing crypto taxes.

“At least 20 or more” firms have left Japan due to taxes, said Sota Watanabe, who moved his company to Singapore two years ago.