Japan Moves To Reform Stablecoin Regulations And Crypto Brokerage Regulations

The Financial Services Agency (FSA) in Japan is set to introduce significant reforms in the regulation of stablecoins and crypto brokerage businesses. The new policy will allow stablecoins to be backed by short-term government bonds and fixed-term deposits, in addition to demand deposits. The aim is to set an upper limit of 50% on the amount of new assets that can be incorporated, balancing convenience and safety.

Currently, Japanese crypto brokerages face stringent requirements under the Virtual Asset Service Provider (VASP) licensing system, deterring many firms from entering the market. In response, a working group commissioned by the FSA has proposed creating a new regulatory category specifically for intermediary crypto businesses with streamlined requirements and AML protocols tailored to their roles.

Japan is also considering approving Bitcoin ETFs and reclassifying cryptocurrencies under stricter financial regulations. This could bring cryptocurrencies under the Financial Instruments and Exchange Act (FIEA) instead of the Payment Services Act (PSA), requiring companies to provide detailed disclosures about their operations.

Overall, these reforms aim to streamline operations, enhance user protection, foster innovation in Japan’s crypto and blockchain sectors, while striking a balance between regulatory rigor and fostering a competitive environment for emerging technologies.