Japan remains cautious about bank issuance of stablecoins, except for trust banks.
The Financial Services Agency (FSA) of Japan has presented its ideas about cryptocurrency and stablecoins to the Financial System Council Working Group on Payment Services. In a recent working group presentation, the FSA distinguished between stablecoins issued on permissioned and public blockchains.
The FSA is proposing to impose the travel rule on trust bank issued stablecoin transfers, requiring Know Your Customer (KYC) procedures for these transfers. However, the reserve requirements for trust bank issued stablecoins may be relaxed, but the travel rule will still apply.
The FSA is comfortable with all stablecoins existing on permissioned chains. On the other hand, the agency is cautious about allowing licensed deposit institutions to issue stablecoins on permissionless chains.
Japan passed stablecoin legislation in 2022, which supports issuance by banks, licensed money transfer companies, and trust companies. As of now, there are no publicly available records or announcements confirming that any banks or trust companies in Japan have received a license from the FSA to issue stablecoins based on open blockchains.
The FSA has not mentioned any specific implications for stablecoins issued by banks or licensed money transfer companies on public blockchains. The agency is hesitant to allow banks, other than trust banks, to issue stablecoins.
Stablecoins issued by trust banks on permissioned blockchains may have relaxed reserve requirements, currently requiring all assets to be held in bank demand deposits. The FSA does not allow banks, other than trust banks, to issue stablecoins.
The FSA is yet to clarify its stance on stablecoins issued by banks or licensed money transfer companies on permissioned blockchains. The agency's focus remains on ensuring the security and transparency of these digital assets while promoting innovation in the payment services sector.
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