Stablecoins in the East: Crypto Regulations Across Asia-Pacific and Beyond
Following our exploration of crypto regulations in the European Union and the United Kingdom, our focus now transitions to other major currencies backing non-USD fiat stablecoins, examining the nations’ stance and advancements in crypto oversight. Specifically, we’ll dive into the regulatory updates in Japan, Singapore, and Australia. Additionally, we’ll touch on the global consensus from recent G20 discussions to offer a comprehensive view.
Japan’s Regulatory Landscape
In June 2023, the Financial Services Agency of Japan rolled out amendments to the “Payment Services Act,” introducing new regulations for stablecoins. According to these amendments, stablecoins are now categorized as Digital Money-like and Cryptocurrency-type. The Digital Money-like stablecoins pegged to the value of fiat currencies, are designated as “Electronic Payment Means.” The amendments restrict the issuance of these Digital Money-like stablecoins to banks, fund transfer service providers, or “limited purpose trust companies,” newly enlisted as issuers for this type of stablecoins. Furthermore, the amendments define the roles and obligations of intermediaries, marking them as specified entities under the Anti-Money Laundering Act and providing a clearer framework for compliance.
The amendment touches on anti-money laundering (AML) measures, notably by executing ‘travel rules.’ These rules require electronic payment and virtual currency exchange operators to share crucial customer data like names and addresses during fund transfers between them, promoting transparency and combating money laundering. This amendment aligns Japan with the 2019 Financial Action Task Force (FATF) recommendations, showing its commitment to global AML standards.
On August 31, Japan’s Financial Services Agency (FSA) released tax reform proposals for the 2024 fiscal year, including a section on crypto assets. Currently, domestic firms are mandated to assess the market value of crypto assets traded in active markets at the close of the fiscal year, including unrealized gains or losses. The FSA’s new proposal suggests adjusting the end-of-period market valuation tax for crypto assets that non-issuing entities continuously hold. The proposal aims to cultivate a supportive environment for Web3 initiatives and bolster the foundation of businesses driven by blockchain technology.
Singapore’s Stablecoin Framework
In August 2023, the Monetary Authority of Singapore (MAS) released a comprehensive stablecoin regulatory framework.
The framework targeting single-currency stablecoins pegged to the Singaporean dollar, or currencies from the group of ten major economies (G10), outlines precise requirements to ensure the stability of value, capital, and redemption mechanisms. It demands that stablecoin issuers maintain a minimum base capital of 1 million Singapore dollars, and issuers must address a redemption request within five business days.
The regulation rules specifically emphasize that the reserves backing the stablecoins be held in low-risk and highly liquid assets. Such reserves should always equal or surpass the value of the circulating stablecoin. To instill more trust in the market, stablecoin issuers must also return the par value of the digital currency to its holders within the stipulated five-day period and make appropriate disclosures, including audited results of the reserves. Stablecoins adhering to these stipulations will be recognized as ‘MAS-regulated stablecoins’ by MAS, distinguishing them from non-regulated counterparts.
Australia’s Licensing Approach
Recently, the Australian Treasury outlined its intentions to bring crypto exchanges and digital asset platforms under the purview of existing Australian financial services laws. The proposal emphasizes applying the framework to digital asset service providers that echo risks presented by entities in the traditional financial sector. It seeks to leverage the Australian Financial Services Licence (AFSL) framework, ensuring consistent oversight and consumer safeguards.
Furthermore, the government’s announcement clarified that the regulatory framework discussed does not encompass anti-money laundering and counter-terrorism financing (AML/CTF) requirements. Businesses offering digital currency exchange services, as defined in the AML/CTF Act, will continue their mandate to register with AUSTRAC.
In their statement, the Australian government has welcomed stakeholders and interested parties to share their views on this proposal, with feedback accepted until December 2023. The process of crafting and implementing the proposed framework is expected to be dynamic, with references to altering existing legal structures demonstrating the government’s policy intentions.
Global Regulatory Consensus
In addition to the regulatory updates in Asia-Pacific nations, there is also some international consensus on crypto regulation. Global bodies like the G20 and the Financial Stability Board (FSB) have recently emphasized the need for coherent and consistent crypto regulatory frameworks.
In July 2023, the Financial Stability Board (FSB) published its global regulatory framework for crypto-asset activities based on the principle of ‘same activity, same risk, same regulation.’ This framework aims to ensure that both crypto-asset activities and global stablecoins are subject to consistent regulations aligned with the risks they pose. The new framework, incorporating lessons from the past year, entails high-level recommendations for crypto-asset markets and more refined guidelines for global stablecoin arrangements. Particular emphasis has been given to safeguarding client assets, addressing conflict of interest risks, and enhancing cross-border cooperation.
In October 2023, the G20 accepted a joint regulatory roadmap proposed by the International Monetary Fund (IMF) and the FSB. This roadmap eschews the blanket ban, advocating for comprehensive oversight of the crypto space. Notably, it calls for global coordination and cooperation, risk management frameworks for crypto firms, and mandates that these companies provide relevant data to authorities. An initial review of this roadmap’s implementation is anticipated by the end of 2025.
In summary, as the cryptocurrency landscape continues to evolve and expand, regulatory bodies worldwide strive to create frameworks that safeguard investors and foster innovation. While challenges persist, the synchronized strides towards clearer and coherent policies reflect a maturing industry poised for sustainable growth.
About GMO-Z.com Trust Company
GMO Trust connects traditional finance and blockchain technology for everyone. We issue GYEN, the world’s first regulated Japanese Yen stablecoin, and ZUSD, our trusted U.S. Dollar stablecoin. Visit our website to learn more.
Disclaimer
This content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.We strongly advise our readers to conduct their own independent research before engaging in any such activities. GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader's location. It is the reader's responsibility to know the applicable laws in their country.
