Japan’s FSA Plans to Put Algorithmic Stablecoins in Bitcoin Category

Japan’s Financial Services Authority (FSA) is looking to categorize algorithmic stablecoins in the same way as Bitcoin. The policy priorities for stablecoin regulation are financial stability, investor protection, and AML/CFT.

The Financial Services Authority (FSA), Japan’s financial watchdog, intends to classify algorithmic stablecoins in the same category as Bitcoin. Additionally, stablecoin issuers will require licenses that classify them as a bank, supplier of financial transfer services, or trust organization.

The report, titled “Regulating the Crypto Assets Landscape in Japan,” also covers Japan’s three eras of legislative development. Stablecoin regulation is one of the report’s main points.

According to the report, self-claimed stablecoins would be classed similarly to Bitcoin, including algorithmic stablecoins like TerraUSD and non-redemption stablecoins. It also states that stablecoins can be issued by banks as deposits.

The first of the three law changes occurred in 2016 and focused primarily on investor protection, anti-money laundering (AML), and countering the financing of terrorism (CFT) rules. The second one, which included derivatives trading, investor protection, and advertising and solicitation, was held in 2019.

The third, which takes place this year, discusses stablecoins and, more significantly, a regulatory framework for banks. AML/CFT, investor safety, and financial stability are its top goals for stablecoins.

In particular, the third period of legislative reforms will significantly alter the stablecoin industry. The change affects Contract for Differences (CFD) transactions, middlemen, and issuers.

Issuers will likely see classification as “crypto asset exchange service providers” and must follow disclosure requirements. Issuers will also require licenses that deem it to be a bank, fund transfer service provider, or trust firm. Intermediaries will adopt the categorization of “Electronic Payment Instrument Exchange Service Providers.”

Algorithmic Stablecoins Are Being Considered Very Seriously

Stablecoins in Japan will undergo some significant changes as a result of the reforms. The nation’s regulatory body is obviously concerned with ensuring that stablecoins adhere to the rules. Many nations have been working on the same thing since TerraUSD collapsed earlier this year.

The paper examines future regulatory directions in its closing part. The Financial Stability Board’s position on algorithmic stablecoins is recommended. Specifically, it advises against using them.

It is likely that Japanese lawmakers will take the FSA’s recommendations under strong consideration when establishing policy. Japan has been ramping up its regulatory actions and is also keen on cooperating on an international level. The Digital Ministry will even launch a DAO to understand the technology.