The long-awaited revision of the Payment Services Act has opened the door for Japanese firms to issue stablecoins, a move that could significantly improve efficiency in payments between companies in Japan and overseas parties. As of June 1, 2023, token-issuing firms must demonstrate they have the underlying assets backing their coins. Moreover, only regulated banks, fund transfer service providers, trust companies, and other financial industry firms are permitted to issue stablecoins.
The new legislation aims to bolster anti-money laundering efforts, requiring distributors to maintain records of transaction information. Banks are thought to be eager to enter this space, with Kondo Hidekazu of GU Technologies, a firm providing stablecoin technology to regional banks such as Shikoku Bank, stating that “many regional banks are considering issuing stablecoins.”
Financial service providers may also explore launching a digital community currency alongside stablecoins to facilitate payments between multinational companies. Experts believe that the B2B payments market is worth approximately $7.2 billion, and Japanese stablecoins could contribute to increased global transactions. The new law differentiates crypto assets and stablecoins, excluding algorithmic or crypto asset-backed “stablecoins” from the stablecoin definition.
In addition to improved efficiency in cross-border payments, stablecoins could find use in international remittance and online shopping sectors. The revised Payment Services Act also ensures user protection and compliance, as token issuers are obliged to suspend transfers and redemption of payments to wallets they do not manage.
This development will likely pique the interest of Japanese megabanks like Mitsubishi UFJ, which, along with its partners, commenced work on a stablecoin interoperability pilot in March. The head of Japan’s central bank also spoke positively about stablecoins this year, claiming they can “co-exist” with central bank digital currencies (CBDCs).
However, one cannot overlook the challenges that stablecoin issuers may face in terms of regulatory compliance and managing underlying assets. Furthermore, given the volatile nature of the crypto market, stablecoins may not always live up to their promise of stability.
In conclusion, the revised Payment Services Act brings a new wave of opportunity for Japanese firms and financial institutions to venture into the stablecoin market, potentially improving the efficiency of cross-border payments and fostering innovation. While the benefits of this development are evident
Source: Cryptonews
