Japanese Regulators Recommend Against Algorithmic Backing In Stablecoins

Financial Services Agency of Japan (FSA) recommended limiting the use of algorithmic stablecoins in the country. This was announced by the Vice-Minister of Foreign Affairs of the agency Tomoko Amaya.

The official specified that the recommendations apply to assets that could become "global stablecoins". According to the FSA, the latter should not use algorithms to maintain the rate.

The agency noted that "stablecoins" are susceptible to the risk of bank run. To eliminate it, regulators need to "take policy measures to ensure redemption at par and price stability."

Amaya also emphasized the importance of oversight of custodial service providers, disclosure by digital asset issuers, and compliance by market participants with anti-money laundering and counter terrorist financing requirements.

The FSA's approach to regulating Stablecoin and cryptocurrencies is based on existing legislation. There is no mention of algorithmic "stable coins," but there is a distinction between "crypto-assets" and "stablecoins of the digital money model."

In June, Japan's parliament passed a bill that recognized Stablecoins as digital money. It will take effect one year after its approval.

Recall that in October, the country's authorities amended six foreign exchange laws as part of an anti-money laundering crackdown.