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Japan's Financial Services Agency (FSA) will allow stablecoin trading by June 2023.
The move overturns Japan's stablecoin ban that was introduced in June 2022 following the LUNA crash, and is seen as part of PM Fumio Kishida's pro-web3 "new capitalism" stance.
Under the old bill, foreign stablecoins were required to be linked only to the Japanese yen or another legal tender.
Kishida's administration is making the Web3 market a part of his economic policy and is likely to change corporate taxes next year to help crypto entrepreneurs.
Japan's FSA clarified that the new law will permit stablecoins that pass checks and are regarded safe for user protection. Compliance checks include requiring stablecoins to have assets to back them.
“This does not mean that all foreign products of so-called ‘stablecoins’ will be allowed without any restriction,” an FSA spokesperson said.
The FSA did not state whether specific stablecoins such as Tether will be allowed.
“FSA does not provide any opportunity to access such information before the decision is made,” the representative said.
These changes to the stablecoin regulations are part of proposed cabinet orders on the amendment to the Payment Services Act of 2022.
Read more: Japan Liberalizes Crypto Industry
Public comments regarding the changers to the act will be accepted by the FSA until 31 January 2023.
“It is scheduled to be promulgated and enforced through necessary procedures upon closure of the public comment, therefore, the exact date is not decided yet,” the spokesperson said.
The Japan Virtual and Crypto Assets Exchange Association, the governing body that deals with crypto assets in Japan, had announced in October its plans to further ease crypto laws in the country.
Currently none of the 31 FSA-registered Japanese exchanges offer stablecoin operations.
In December, Japanese crypto exchange Kraken announced it will shut down operations by 31 January 2023, citing efforts to prioritize resources.
Read more: Kraken Shutters Japan Operations
“Current market conditions in Japan in combination with a weak crypto market globally mean the resources needed to further grow our business in Japan aren’t justified at this time,” Kraken said in a blog post.