Japan’s Cabinet has approved a proposal to amend the Payment Services Act, setting the stage for regulatory changes aimed at easing restrictions on stablecoins and crypto brokerage firms. The bill, backed by the Financial Services Agency (FSA), has now been submitted to the National Diet for legislative review and potential enactment.
Path to Enactment
For a bill to pass through the Cabinet, it must receive a majority vote from attending Cabinet members, with the Prime Minister playing a crucial role in building consensus. Following approval, the bill is sent to the National Diet, where it undergoes committee-level examination, debate, and possible amendments before reaching a full chamber vote. If approved by both the House of Representatives and the House of Councillors, it is sent to the Emperor for ceremonial promulgation before becoming law.
Key Changes in the Crypto Reform Bill
The proposed amendments introduce significant regulatory updates for Japan’s cryptocurrency sector, particularly in stablecoin backing and crypto brokerage operations:
- Expanded Collateral for Stablecoins
- The bill permits stablecoins to be backed by short-term government bonds and fixed-term deposits, rather than being limited to demand deposits.
- A 50% upper limit will apply to government bonds and deposits used as collateral.
- Currently, Japan mandates a strict 1:1 cash deposit backing for stablecoins, but the new rule grants issuers flexibility to use Japanese and U.S. government bonds, provided they have a maturity of three months or less.
- Introduction of a New “Intermediary” Crypto Brokerage Category
- The bill creates a separate classification for crypto brokerages, distinguishing them from traditional crypto exchanges.
- Currently, brokerages must fulfill the same registration requirements as exchange platforms, including obtaining a virtual asset service provider (VASP) license.
- Under the new framework, intermediaries will adhere to their own set of requirements and anti-money laundering (AML) obligations, streamlining the regulatory process.
Implications for Japan’s Crypto Market
The reform is expected to facilitate greater participation from crypto firms in the Japanese market by reducing regulatory barriers. By enabling stablecoin issuers to diversify collateral options and easing brokerage licensing requirements, Japan aims to strengthen its digital asset ecosystem while maintaining oversight.
With the bill now in the hands of the National Diet, its approval could mark a pivotal shift in Japan’s approach to digital asset regulation, positioning the country as a more attractive hub for crypto innovation and investment.
