Japan Approves Reform to Ease Cryptocurrency and Stablecoin Regulations

The Japanese government has approved changes to the laws regulating cryptocurrencies and stablecoins, aiming to make it easier for crypto companies to enter the country and provide stablecoin issuers with more options to back their value.

One of the most significant changes is that stablecoins can now be backed not only by cash in banks but also by short-term government bonds and fixed-term deposits. However, these new assets will have a 50% limit, and only bonds with a maturity of three months or less will be accepted.

Additionally, a new category will be created for companies that act as intermediaries in the crypto world, such as brokers. Previously, these companies had to comply with the same rules and licensing requirements as cryptocurrency exchanges. Under the new law, they will have a more specific regulatory framework with their own requirements and rules to prevent money laundering.

This bill will now go to the Japanese Parliament for debate and approval. If everything proceeds as expected, it will officially become law once the Emperor enacts it.

What is a stablecoin and how does it work?

Stablecoins are a type of cryptocurrency designed to maintain a stable value. Unlike Bitcoin or Ethereum, whose prices can rise and fall significantly in a short time, stablecoins are backed by assets such as cash, government bonds, or even other cryptocurrencies to avoid such fluctuations.

Typically, each stablecoin is pegged to the value of a traditional currency, such as the US dollar or the Japanese yen, at a 1:1 ratio. This means that, in theory, if you have 1 stablecoin equivalent to one dollar, you should always be able to exchange it for one real dollar.