Japan's Financial Services Agency Proposes Changes to Stablecoin Regulations

According to Odaily, Japan's Financial Services Agency (FSA) has recently presented several proposals to the Financial System Council's Payment Services Working Group concerning cryptocurrencies and stablecoins. The FSA expressed reluctance to allow banks other than trust banks to issue stablecoins. For stablecoins issued by trust banks, the agency aims to relax the current reserve requirements, which mandate that all assets be held in the form of bank demand deposits. However, the FSA also intends to implement the travel rule, necessitating Know Your Customer (KYC) procedures for transfers of stablecoins issued by trust banks. Japan enacted stablecoin legislation in 2022, permitting banks, licensed remittance companies, and trust companies to issue stablecoins. As part of its presentation to the working group, the FSA differentiated between stablecoins issued on permissioned blockchains and those on public blockchains. The agency expressed satisfaction with stablecoins existing on permissioned chains but remained cautious about allowing licensed deposit-taking institutions to issue stablecoins on non-permissioned chains.