The amended Payment Services Act, which came into effect on June 1, will allow the issuance of domestic stablecoins, bringing benefits to multinational companies.

Stablecoin to be issued within the year

With the enforcement of the revised Payment Services Act on June 1, 2023, interest in the possibility of issuing legal currency-backed stablecoins has skyrocketed.

Stablecoins are created using blockchain technology and are designed to maintain price stability based on the underlying assets. Under the revised Payment Services Act, it is defined as an electronic payment method.

In the global market, USDCoin (USDC) and Tether (USDT), which are linked to the US dollar, have become mainstream, and have already been used as payment methods when purchasing virtual currency transactions and NFTs (non-fungible tokens). It is also expected to expand its use in international remittances and online shopping.

According to the revised Payment Services Act, the responsibility for preparing the underlying assets for stablecoins issued in Japan rests with the issuer, and issuers will be limited to banks, fund transfer service providers, trust companies, etc. Regarding stablecoins issued overseas, the distributor, not the issuer, is obligated to protect the assets. Moreover, from the viewpoint of anti-money laundering, distributors are required to record transaction information.

connection:Financial Services Agency lifts ban on domestic distribution of overseas-issued stablecoins in anticipation of Web3

Developing the business-to-business payment market

According to a report by the Nihon Keizai Shimbun, the lifting of the ban on domestic issuance of stablecoins is expected to improve the efficiency of payments between companies in Japan and overseas.

The business-to-business payment market is around 1,000 trillion yen, more than three times the transaction market between businesses and individuals. If stablecoins lead to an increase in global transactions, it may become easier to earn fees such as payments between multinational companies.

Hidekazu Kondo of GU Technologies, which provides stablecoin technology to regional banks such as Shikoku Bank, said, “Many regional banks are considering issuing stablecoins.” It is said that the operation as a digital community currency is also in sight.

The consortium blockchain “Japan Open Chain” provided by GU Technologies is fully compatible with Ethereum and has an advantage over electronic money, which is difficult to exchange with each other.

Startup JPYC plans to finish registering as a funds transfer business by the end of the year and issue yen-based stablecoins. JPYC, which the company has provided as a prepaid payment method so far, is expected to expand its use by becoming a stable coin under the new regulations.

connection:Four companies, including Shikoku Bank, test stablecoins on Ethereum-compatible blockchains

Response to Cabinet Office Ordinance and Public Comments

On May 26, the final draft of Cabinet Office ordinances and guidelines that supplement detailed rules and operational methods for the law, as well as responses to public comments with a deadline of January 2011, were published.

According to public comments, it is prohibited to misunderstand stablecoins whose value is not always stable, such as algorithmic or crypto-asset-backed stablecoins, as stablecoins.

In addition, clear guidelines will be provided for user protection and compliance. For example, funds transfer service providers will be obliged to establish a system to suspend the transfer and redemption of electronic payment methods related to wallets that they do not manage. In addition, it has taken a cautious stance on banks’ involvement in stablecoins using permissionless blockchains.

connection:Mitsubishi UFJ Trust and Banking and others to conduct verification tests for the introduction and spread of stablecoins

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