Japanese banks are preparing to move into the stablecoin market as the ban on them has been lifted.
Japanese companies can now issue stablecoins as a result of a long-awaited piece of legislation that came into effect today.
The revised Payment Services Act was enacted at midnight on June 1, 2023.
According to the terms of the act, all firms that issue tokens must be able to demonstrate that they have the underlying assets that support their coins.
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Only regulated banks, fund transfer service providers, trust companies, and other financial industry firms are permitted to issue these coins.
New anti-money laundering regulations will also require distributors to maintain records of transaction information.
Banks are thought to be interested in entering this field.
The newspaper Nikkei featured quotes from Kondo Hidekazu of GU Technologies.
The company provides stablecoin technology to regional banks such as Shikoku Bank.
“Many regional banks are considering issuing stablecoins.”
Industry insiders also suggested that financial service providers might also consider launching “a digital community currency.”
Why Do Japanese Banks Want to Issue Stablecoins?
The media outlet stated that the “lifting” of the de facto ban on the domestic issuance of stablecoins was “expected to improve the efficiency of payments between companies in Japan and overseas parties.”
Experts believe the B2B payments market is worth around $7.2 billion.
The Japanese media outlet CoinPost reported:
“If [Japanese] stablecoins lead to an increase in global transactions, it may become easier [for issuers] to earn fees by facilitating payments between multinational companies.”
Experts also believe that stablecoins could be utilized in the international remittances and online shopping sectors.
The new law specifies that cryptoassets and stablecoins are fundamentally different.
It stipulates that algorithmic or cryptoasset-backed “stablecoins” cannot be classified as stablecoins.
Furthermore, guidelines have been established to guarantee “user protection and compliance.”
Token issuers will be required to ensure that they can “suspend the transfer and redemption of” payments to “wallets that they do not manage.”
This development will likely be of significant interest to Japanese megabanks like Mitsubishi UFJ.
Mitsubishi UFJ and its partners began working on a stablecoin interoperability pilot in March.
The head of Japan’s central bank has also spoken in favor of stablecoins this year.
The bank chief stated that stablecoins can “co-exist” with central bank digital currencies (CBDCs).