Japan’s Financial Services Agency (FSA) has announced a draft system and guidelines for the circulation of stablecoins whose value is tied to legal currencies such as the U.S. dollar, according to a Nikkei report on Monday.

The new framework will be applied in conjunction with the revised Payment Services Act coming into force in 2023, allowing domestic distributors to handle foreign-issued stablecoins on the condition that they maintain sufficient collateral.

Stablecoins are a type of cryptocurrency whose value is usually pegged to a fiat currency such as the U.S. dollar, the euro, or the pound, or commodities like gold.

They're designed to stabilize the price of otherwise volatile cryptocurrencies like Bitcoin and can be also used as stores of value or units of account.


FSA Seeks Feedback

A separate report said the FSA is seeking public feedback for a draft regulation that will allow local crypto exchanges to handle stablecoin trading, meaning that popular stablecoins like Tether (USDT) or USD Coin (USDC) may begin trading on Japanese exchanges.

Per the report, the Japanese watchdog still has doubts surrounding the effectiveness of recording transaction information. The FSA also believes that tighter anti-money laundering measures will be required after the lifting of the ban.

Currently, none of the 31 Japanese crypto exchanges registered with the FSA list any stablecoins.

The latest move by the FSA follows the Japanese parliament's landmark law this past June, which clarified the legal status of stablecoins, essentially defining them as digital money.


Under the legislation, which is set to come into effect in 2023, stablecoins must be linked to the yen or another legal tender and guarantee their holders the right to redeem them at face value.

The bill also stipulated that stablecoins can only be issued by licensed banks, registered money transfer agents, and trust companies.

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