Japan has become one of the first major economies to introduce a legal framework around stablecoins, the cryptocurrencies thrust into the global spotlight by last month’s collapse of the TerraUSD token.
The parliament passed a bill on Friday that clarified the legal status of stablecoins, defining them essentially as digital money. Stablecoins must be linked to the yen or another legal tender and guarantee holders the right to redeem them at face value, according to the new law.
The legal definition effectively means stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies. The legislation doesn’t address existing asset-backed stablecoins from overseas issuers such as Tether, or their algorithmic counterparts. Crypto exchanges in Japan don’t list stablecoins.