Stablecoins to be Issued by Licensed Banks and Trust Companies in New Japanese Law

In a move to protect investors, Japan’s parliament has passed a bill classifying stablecoins as digital money that must be connected to the nation’s currency, yen, or another legal tender. 

The legal framework, which is expected to be rolled out in a year, also stipulates that holders have the right to redeem stablecoins at face value. Per the announcement:

“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 like Tether or their algorithmic counterparts.”

It seems it’s a race against time for global governments to put up guardrails in the stablecoin arena following the shocking collapse of TerraUSD (UST), which triggered the loss of approximately $60 billion.


Things started going haywire after the algorithmic UST stablecoin on the Terra network experienced a de-pegging from its US Dollar benchmark.


Some experts like Ransu Salovaara, the CEO of DeFi platform Likvidi, stated that the algorithmic nature of UST could have triggered the crash. 


This explains why governments are looking at cracking the whip in the stablecoin space because tokens in this sector have a market value of around $161 billion, according to CoinGecko.


Tether (USDT) tops the stablecoin list, followed by Circle’s USD Coin (USDC) and Binance USD (BUSD).


Is it the end of the algorithmic stablecoin era?


Speaking to CNBC during the World Economic Forum in Davos, Reeve Collins noted that it was both unfortunate and not a surprise that money was lost through the algorithmic UST stablecoin because smart people were trying to peg it to the dollar. 


The Tether co-founder added:

“A lot of people pulled out their money in the last few months because they realized that it wasn’t sustainable. So that crash kind of had a cascade effect. And it will probably be the end of most algorithmic stablecoins.”

With algorithmic-based stablecoins being at the experimental stage, volatility becomes inevitable. 


Anshul Dhir, the co-founder, and COO of EasyFi Network pointed out:

“Experimental algorithmic stable coins are volatile, and it is believed that it will take some time to find a good algorithmic stable coin. Over a period of time, such programmable money should be possible, which ultimately is the end goal of decentralized finance.”

Therefore, time will tell how things turn out for algorithmic stablecoins moving forward. 

Image source: Shutterstock


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Creator of World’s Second-Largest Stablecoin Is Pursuing a US Commercial Banking License

Circle, the digital payment company behind the widely-used USDC stablecoin, is announcing its intentions to become a full-reserve national commercial bank.

Jeremy Allaire, co-founder and CEO of Circle, shares in a blog post his company’s plans to pursue a commercial banking license in the US, along with his perspective on the future for USDC.



“Circle intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, U.S. Treasury, OCC (Office of the Comptroller of the Currency), and the FDIC (Federal Deposit Insurance Corporation). We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system…

In the coming years, we anticipate that USDC will grow into hundreds of billions of dollars in circulation, continue to support trillions of dollars in low-friction, high-trust economic activity and become widely used in financial services and internet commerce applications. Establishing national regulatory standards for dollar digital currencies is crucial to enabling the potential of digital currencies in the real economy, including standards for reserve management and composition.”

Launched just three years ago, USDC quickly became the second-largest stablecoin in circulation. According to CoinGecko, USDC bolsters a market cap of over $28 billion, falling short of the top stablecoin, USDT, which has more than $63 billion in circulation.

In the past week, Christopher Waller, a member of the Board of Governors of the Federal Reserve System, highlighted some of the advantages that stablecoins like USDC could bring to the general public. 

“If one or more stablecoin arrangements can develop a significant user base, they could become a major challenger to banks for processing payments. Importantly, payments using such stablecoins might be ‘free’ in the sense that there would be no fee required to initiate or receive a payment. Accordingly, one can easily imagine that competition from stablecoins could pressure banks to reduce their markup for payment services.”

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Featured Image: Shutterstock/Kusal Weeramanthri


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New Zealand’s Reserve Bank consulting public on a potential CBDC

The Reserve Bank of New Zealand says a central bank digital currency might be a “solution” to the ongoing reduction in the use of cash and that it will look more closely at the use of cryptocurrencies.

The bank will open up public consultations regarding a CBDC and the emergence of new digital forms of money including stablecoins.

In a July 7 announcement, the Reserve Bank revealed it will be releasing a set of “money and cash issues papers for feedback from August to November,” which build upon the “Future of Cash” consultations from 2019.

The bank will “introduce and seek feedback” on crypto-focused papers that will look at the potential for a CBDC “to work alongside cash as government-backed money,” along with unspecified issues that arise from innovations in money and payment tech, including cryptocurrencies such as Bitcoin and stablecoins.

NZ’s Reserve Bank appears to be open-minded towards the deployment of a CBDC, but it has emphasized that a measured and cautious approach is required.

Assistant Governor Christian Hawkesby said in October 2020 that the bank had “no imminent plans” to deploy a CBDC, noting that “to issue currency that meets the needs of the public, we must take a new and holistic approach. We acknowledge there is much work to be done.”

In the latest CBDC related announcement, Hawkesby notes that:

“The potential for a Central Bank Digital Currency to help address some of the downsides of reducing physical cash use and services is something we want to explore for New Zealand.”

“A CBDC, similar to digital cash, might well be part of the solution, but we need to test our assessment of the issues and proposed approach before developing any firm proposals,” he added.

The Assistant Governor stated that despite the declining number of New Zealanders using cash, it is still “widely valued because it ensures inclusion” and gives the citizens “autonomy and choice in the way they pay and save.”

“Personal and retail customers are struggling with the loss of cash and in-person banking services despite banks’ efforts to help them adapt,” he added.

Related: New Zealand retirement fund reportedly allocates 5% to Bitcoin

However, Hawkesby noted that digital payments are the preferred option for the majority of New Zealanders and that the bank’s “job is to ensure that these transitions work for all New Zealanders”:

“We also know that digital forms of payment are the preferred way of paying for the majority of us, and that the future will undoubtedly involve less cash.”