Japan issues new stablecoin law in the wake of Terra collapse

What 

The Japanese government passed a new law stating that any stablecoin must be backed by the Japanese yen and must be redeemable at face value

Why 

The recent collapse of the Terra stablecoin sent shockwaves through the crypto community. Terra belonged to a group of stablecoins known as algo-stablecoins, which was governed by computer code and not backed by fiat collateral 

What next 

Under the new law, only banks and certain other financial institutions will be able to issue stablecoins 

The story 

This new move forms part of a five-year process by the Japanese government to protect investors from fragile crypto projects. Japan’s Financial Services Agency (FSA) started working on this framework well before the collapse of Terra. 

Japan is one of the first countries to impose a law specifically aimed at regulating stablecoins, and this firm stance is seen by some as the groundwork for renewed confidence in the shaken crypto market. 

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