Japan Adopts Stablecoins while Ensuring Investor Protection

The Japanese Parliament passed a stablecoin law that granted legal status to stablecoins that protect investors’ rights. The new law gave legal status to all the stablecoins that were backed by currencies such as the Yen.

The Announcement

On Jun 3, 2022, The Japanese Parliament became one of the first major economies to adopt cryptocurrencies(stablecoins) as legal payment. The law majorly focussed on consumer protection which was due to the infamous LUNA and Terra UST collapse. The move was also a part of the five-year plan of the Japanese Government to enhance consumer protection.

The law states that stablecoins must be pegged to Yen or other legal tender and must be redeemable at face value at all times. It essentially means that stablecoins in Japan can now only be issued by banks and other certain financial bodies. It is interesting to note that crypto exchanges in Japan do not list stablecoins.

What are Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged to an external financial or commodity instrument such as US Dollar(BUSD, USDC, etc.), a barrel of oil(Venezuela’s Petro), etc. They are very less volatile and hence preferred by cryptocurrency investors as a store of value.

The Terra Blockchain collapse sent shockwaves across exchanges and many governments and acted to completely tarnish the image of stablecoins. Further, the de-peg of USDT (albeit by just 0.01%) further scared investors and governments alike. The net worth of stablecoins as of now is more than $160 Billion.