Last week the Financial Services Agency (FSA) presented some ideas relating to cryptocurrency and stablecoins to the Financial System Council Working Group on Payment Services. The FSA is reluctant to allow banks to issue stablecoins other than trust banks. For trust bank issued stablecoins, it wants to relax the reserve requirements which currently require all assets to be held in bank demand deposits. However, it also wants to impose the travel rule, requiring KYC for trust bank issued stablecoin transfers.
Japan passed stablecoin legislation in 2022 that supported issuance by banks, licensed money transfer companies and trust companies. As part of its working group presentation, the FSA distinguished between stablecoins issued on permissioned blockchains and those on public blockchains. It’s comfortable with all three existing on permissioned chains. However, it is wary of allowing licensed deposit institutions to issue stablecoins on permissionless chains.
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