A draft law for the regulations of stablecoins in Japan and to protect the investors’ money has been approved by the Parliament of Japan. The LUNA and Terrausd fiasco led to the adoption of new laws in different countries. Similarly, Japan also approved the draft law following the collapse of the stablecoin terrausd.
The primary reason for the bill’s passing was to determine the legality of stablecoins. Consequently, the legislature of Japan has defined such cryptocurrencies as digital money after the voting on Friday this week.
The collapse of terrausd and its sister token, LUNA, had drastic impacts on the entire crypto industry. Investors lost millions of dollars due to the fiasco. As a result, people lost their trust and confidence in stablecoins.
Japan has become one of the first economies to adopt such legislation after the collapse of terrausd. The provisions approved by the legislature state that the stablecoins must be pegged to the Japanese yen. However, any other legal tender is also accepted. Afterwards, the provisions state that the holders of the stablecoins must be guaranteed the right to redeem the coins at face value.
Consequently, Mitsubishi UFJ Trust and Banking Corporation plan to launch and circulate a stablecoin. The banking unit has stated that the stablecoin will be in accordance with the new legislation. Accordingly, the coin will be backed by the Japanese yen and redeemable at face value.
The new legislation does not provide any information regarding the existing asset-backed stablecoins. Such coins are issued by algorithmic stablecoins or tether (USDT). Hence, Japan has not listed such cryptocurrencies as stated by the report.
USDT, USDC, and Binance USD (BUSD) are the leading stablecoins. Their cumulative value is almost $160 million. However, after the crash of terrausd, investors worldwide are urging the concerned authorities to bring forth regulations in the crypto industry. Similarly, any legislation adopted by any economy in the world is done after thorough consideration to ensure investor protection.
The legal framework set forth by the legislature of Japan will likely take effect within a year. Furthermore, the Financial Services Agency (FSA) of Japan is planning to introduce regulations targeted to govern the activities of the stablecoins that will take effect in the coming months.