In response to the collapse of Terra, the Japanese government is hurrying to implement new stablecoin rules
On Friday, Nikkei, a Japanese news agency, reported that the Japanese parliament enacted a measure prohibiting stablecoin issued by non-banking companies.
As per law, stablecoins may only be issued by licensed banks, registered money transfer agencies, and trust businesses in Japan.In addition to establishing a registration mechanism for financial institutions that issue such digital assets, the new law includes anti-money laundering safeguards.
According to the newspaper, the measure seeks to safeguard investors and the financial system from the dangers connected with the fast adoption of stablecoins, whose market grew to more than 150 billion dollars or 20 trillion yen.
According to reports, the new legal framework will go into effect in 2023, with the Japan Financial Services Agency aiming to publish rules for stablecoin issuers in the following months. The algorithmic stablecoin Terra USD (UST) lost its 1:1 value against the U.S. dollar in early May, precipitating a significant slump in cryptocurrency markets exacerbated by the Terra tokens crash.
The stablecoin market instability was not limited to the Terra blockchain. Other algorithmic stablecoins, such as DEI, also lost their dollar peg in late May, falling to as low as $0.4.