Japan has approved new regulations aimed at strengthening stablecoin collateral management and enhancing user protections. The move comes as the country seeks to balance innovation in digital finance with financial stability and investor security.
The Financial Services Agency (FSA) of Japan has endorsed regulatory changes that broaden the range of assets that can back stablecoins. Previously, stablecoins in Japan were primarily backed by demand deposits in regulated financial institutions. Under the new framework, issuers will be permitted to hold short-term government bonds and fixed-term deposits as collateral. This adjustment is intended to provide more flexibility while maintaining a high level of financial stability.
According to a report from CoinPost, the amendments introduce an upper limit of 50% on the proportion of stablecoin reserves that can be held in these newly approved asset classes. This cap is designed to prevent excessive exposure to market fluctuations while allowing issuers to optimize liquidity management.
The reforms align with Japan’s broader goal of fostering a stable digital financial ecosystem. By ensuring that issuers have a diversified pool of assets, regulators aim to mitigate systemic risks that could arise from potential financial downturns or institutional failures.
Enhanced User Protections in Bankruptcy Scenarios
One of the most significant aspects of the new regulations is the strengthening of user protections in the event of an exchange platform’s insolvency. The revised framework ensures that customer assets held in Japanese subsidiaries of foreign-owned cryptocurrency exchanges remain within Japan’s legal jurisdiction. This measure is intended to prevent funds from being transferred abroad during bankruptcy proceedings, reducing the risk of users losing access to their holdings.
Finance Minister Katsunobu Kato emphasized the importance of these protections, stating, “I want to create an environment in which users can use highly convenient remittance settlement services with peace of mind.” The changes reflect growing concerns over the stability of digital asset platforms, particularly in light of past high-profile collapses within the industry.
The approval paves the way for amendments to the Trust Business Act and the Payment Services Act, both of which play a critical role in Japan’s financial regulatory landscape. These legislative changes will solidify the legal standing of stablecoin issuers and enhance oversight mechanisms to ensure compliance.
Creation of a New Regulatory Category for Crypto Brokers
Another key component of the regulatory overhaul is the introduction of an “intermediary business” category for cryptocurrency-related firms that facilitate transactions without holding user assets. Under the current system, such entities are required to complete the same registration process as full-fledged exchanges, making market entry challenging.
The proposed changes will ease these requirements, allowing intermediaries to operate under a streamlined regulatory framework with tailored anti-money laundering (AML) obligations. This adjustment is expected to lower barriers for firms looking to engage in the Japanese crypto market, fostering greater competition and innovation.
