Japan’s Top Financial Regulator Planning to Limit Stablecoin Issuance to Banks & Wire Transfer Companies

After the US, Japan is focusing on stablecoins and is acting to limit the number of companies that can issue these assets backed by fiat currency, according to a Nikkei report. The country’s top banking regulator, Financial Services Agency (FSA), is reportedly planning to propose legislation next year to restrict the issuance of stablecoins to banks and wire transfer companies, which are legally required to protect customer assets. The report cited China’s real estate giant Evergrande’s debt crisis bringing attention to the stability claims made by the stablecoins like USDT and USDC. In September, as we reported, Tether and Circle came under scrutiny for holding commercial paper, but the former clarified that it doesn’t hold any commercial paper issued by Evergrande; rather, its vast majority of the commercial paper is in A-2 and above rated issuers. The market cap and usage of stablecoins have exploded in popularity ever since last year. Their combined market cap now stands above $146 billion compared to just $29 bln at the beginning of this year. Besides limiting the issuers, the FSA will also toughen regulations to prevent money laundering, as per the report. Intermediaries like wallet providers will further be brought under the agency's oversight and required to meet obligations under the law on preventing transfers of criminal proceeds, including verifying user identities and reporting suspicious transactions, it added. Meanwhile, in a November report, the US financial authorities, including OCC, the FDIC, and the Federal Reserve, called for stablecoin issuers to be insured depository institutions, which are subject to regulation and supervision.