What is a Stablecoin? Summary of Key Legal Revisions

Regulatory developments concerning crypto-assets are currently taking place in many countries. Japan, on the other hand, has been ahead of the rest of the world in developing legislation, and there is a tailwind to promote Web 3.0 in light of the global situation.

Against this backdrop, a legal amendment was made in June that clarified the definition of stave coins ahead of the rest of the world. How will this change crypto assets and the payments business in Japan?

Market capitalisation of Tether, which supports the crypto asset market.

The revised Funds Settlement Act, which came into force on 1 June 2023, clarified regulations on stable coins for the first time. In line with this, attention to stablecoins is increasing day by day.

The definition of stable coins as a result of the amendment to the law has significant implications for operators already engaged in related businesses and those considering doing so in the future.

Stablecoin is said to be effective mainly in areas of settlement, such as cross-border transactions with foreign countries and accounting procedures, which have been time-consuming in the past.

In addition, as it is now possible to issue stable coins denominated in legal tender in Japan, the legal amendment can be seen as a positive development for existing crypto asset users.

To begin with, stablecoin is written in English as ‘Stablecoin’, meaning ‘stable currency’. Crypto assets are known for their extremely high volatility, but the main feature of stablecoins is that they have backing assets and other assets to stabilise their value.

There is a wide range of types of stablecoins. The most common types are ‘legal tender-backed’, whose value is linked to legal tender such as the Japanese yen or US dollar, ‘crypto-asset-backed’, whose value is backed by a specific crypto-asset, and ‘commodity-backed’, whose value is linked to commodities such as gold, oil or platinum.