Japan Passes Legal Framework for Stablecoins

The new legislation, which comes into effect in 2023, defines stablecoins as digital money and restricts issuance to licensed financial institutions

article-image

National Diet Building in Tokyo, Japan | Source: Shutterstock

share

key takeaways

  • Friday’s law states stablecoins must be linked to the yen or another legal tender
  • Japan is among the first major economies to make clear the legal status of stablecoins

Japan’s parliament passed a landmark investor protection bill Friday that sets a legal framework for stablecoins, characterizing the assets as digital currencies. 

The law states stablecoins, which are generally backed by one or more reserve assets, must be pegged to the yen or another legal tender, according to reports by Bloomberg and Financial Times. They must also guarantee redemption to the holder at face value.

Friday’s announcement follows the shocking crash of TerraUSD (UST), over which US Treasury Secretary Janet Yellen has expressed concern. However, the legislation in Japan was not in response to either algorithmic experiments or existing reserve-backed stablecoins from foreign issuers like Tether, Bloomberg reported.

Under Japan’s law, stablecoins can only be issued by established financial institutions such as registered banks, money transfer agents and trust companies.

The move to confine stablecoin issuance to licensed financial firms was expected. Joerg Schmidt, B2C2’s director of strategy, told Blockworks late last year that this would be in line with international developments, because the US too has proposed issuance only by federally insured banks.

Japan’s Financial Services Agency had been drawing up a framework around stablecoins even before the market’s recent downtrend. The new legal guidance will come into effect in 2023, and stablecoin issuers are expected to receive detailed information in the coming months.

Fiat-backed stablecoins are backed 1-to-1 by cash or cash-like assets held in reserve with an issuer. Meanwhile, non-collateralized algorithmic stablecoins aren’t fully backed by assets but are supposed to remain stable through mining and burning units combined with arbitrage incentives. TerraUSD was the largest such stablecoin, reaching a market cap of over $18 billion before it failed.

The UST collapse has put a fresh spotlight on stablecoins’ potential threat to financial stability, as seen in the UK’s recent move to line up new safeguards for the assets.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Featured.png

Research

Helium stands at a pivotal moment in its evolution as a decentralized wireless network, balancing rapid growth, economic restructuring, and global expansion. With accelerated growth in domestic DAUs and Hotspots supporting its network, Helium is leveraging strategic partnerships and innovative proposals to scale internationally. The recent implementation of HIP 138, “Return to HNT,” has unified its token economy under HNT, simplifying participation and strengthening liquidity, while HIP 139’s phase-out of CBRS refocuses efforts on scalable Wi-Fi offload. Meanwhile, governance shifts under HIP 141 raise questions about centralization as Nova Labs consolidates control over the roadmap.

article-image

The Arbitrum-based perps DEX recently launched its points campaign

article-image

P2P Foundation founder Michel Bauwens revealed this week that Satoshi wrote him over email in the early days of Bitcoin

article-image

A Blockworks Research report looked at how Hyperliquid has maintained its hype and how it can build out its businesses

article-image

Dragonfly’s Rob Hadick discussed how the firm is approaching investments in the current market

article-image

The asset surged over the past seven days to reach its highest-ever weekly close on the SOL/ETH pair

article-image

Industry watchers note that SOL ETFs have attracted a fraction of the demand for bitcoin and ether ETFs