Japan is joining a growing list of countries seeking to tighten oversight for the stablecoin sector. According to a local report, the country’s financial watchdog wants to limit stablecoin issuance to banks and wire transfer companies to prevent stablecoin runs.
The Financial Services Agency (FSA) seeks to join other regulators and legislators globally, including the U.S. Congress and the Securities and Exchange Commission (SEC), in stablecoin scrutiny. According to a local financial newspaper Nikkei, the watchdog will put forward the new stablecoin proposals in 2022.
Stablecoins have become a global concern for regulators. While most countries have yet to issue regulations for Bitcoin, some are shelving these to first focus on stablecoins, spurred by their unchecked rise and their importance to the current digital asset market.
There are currently over 70 stablecoins with a total market capitalization of over $150 billion. However, the top 2—Tether and USD Coin—control 70% of the market. Despite its glaring red flags and regulatory troubles, Tether is the most traded digital asset in the market. In the past 24 hours, it recorded a higher volume than the next seven digital currencies combined. This is despite several reports exposing the blatant disregard for financial guidelines by iFinex, its parent company. USD Coin is not any better, controlled by Circle Financial, which itself has had quite a few run-ins with U.S. regulators.
So it’s no surprise that regulators globally are pretty concerned with stablecoins. In Japan, the FSA believes that limiting issuance to wire transfer companies and banks will prevent stablecoin runs as these entities are legally required to protect consumer assets.
The recent debt crisis involving one of the largest companies in neighboring China has played a big part in rattling Japanese regulators, Nikkei stated. China Evergrande, a real estate giant, is on the verge of collapse and could take down several financial entities with it. Tether even had to release a statement denying holding any commercial paper tied to Evergrande.
Watch: CoinGeek New York panel, Tokenized Assets, Stablecoins and Custody with BSV
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