The transformation of Japan's cryptocurrency market is accelerating. The country's Financial Services Agency (FSA) is considering new regulation that would allow banks to hold Bitcoin and other similar cryptocurrencies for investment purposes.
Groundbreaking regulation in Japan: Banks will be able to invest in cryptocurrencies
According to the Japanese newspaper Yomiuri, the Japan Financial Services Agency (FSA) is developing a regulation that would allow banks to buy, sell, and hold Bitcoin and altcoins for investment purposes. The FSA's plan would ease conservative guidelines enacted in 2020 that prohibited banks from acquiring crypto assets. The regulator aims to allow banks to buy and sell cryptocurrencies just like stocks or government bonds with the new system. However, various measures, such as strict capital adequacy rules and risk limits, are also on the agenda to ensure this freedom does not jeopardize financial stability.
Discussions within the Financial System Council will determine the direction of the regulation. These discussions are expected to set upper limits on the amount of cryptocurrencies banks can hold on their balance sheets. In this way, regulators aim to balance risk management with innovation.
Cryptocurrencies are quite popular in Japan
The popularity of cryptocurrencies in the country is behind Japan's initiatives. The number of individual crypto accounts in the country has surpassed 12 million, a figure that has more than tripled in the last five years. With the FSA's new approach, crypto will be defined as a "legitimate" investment vehicle within the financial system.
The FSA is also considering opening the door for banks to register as crypto asset service providers. This will allow traditional banks to hold the same license as exchanges and offer investors a more secure trading environment.
Stablecoin initiative
Meanwhile, as reported last week, the stablecoin initiative of three major Japanese banks attracted attention. The three major banks (Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), and Mizuho Financial Group) aim to establish a new blockchain-based infrastructure for corporate payments and cross-border transactions. In the first phase, a stablecoin pegged to the yen will be launched, with a dollar-pegged version expected to follow later. The project will operate on a system developed by fintech company Progmat Inc. and ensure interbank compatibility through a common technical standard.
The primary use of these stablecoins will be payments between large companies. Mitsubishi Corporation is planned as the first user of the pilot application. Real-world trials are expected to begin before the end of the current fiscal year.
Meanwhile, the FSA is taking steps to ensure that digital asset trading is a fair market. The agency is reportedly preparing to propose legal amendments that would explicitly prohibit transactions based on non-public information. Under these regulations, those who violate this prohibition will face fines proportional to the amount of illicit profits.
