Japan Cabinet Approves Amendment to Payment Services Act

The Cabinet of Japan has green lit a proposal to amend the Payment Services Act, easing regulations for stablecoins and crypto brokerages.

According to a press release issued by the country’s Financial Services Agency (FSA), the bill was approved by the Cabinet and submitted to the National Diet on the same day. The FSA previously approved the bill, which could facilitate easier entry for crypto firms into the Japanese market.

Legislative Process

For a bill to pass through the National Diet, it must receive a majority vote from the Cabinet members present at the meeting. The Cabinet is led by the Japanese Prime Minister, who plays a key role in determining consensus, as it operates under the principle of collective responsibility. Upon approval, the bill is formally submitted to the National Diet for debate and voting.

Once it passes through the Diet, it is assigned to a relevant committee for examination, debate, and potential amendments before presentation to the full chamber. If both the House of Representatives and the House of Councillors approve the bill, it is then sent to the Emperor for ceremonial promulgation, formalizing and enacting the law.

Potential Changes to Japan’s Crypto Regulations

The proposed bill would allow stablecoins to be backed not only by demand deposits but also by short-term government bonds and fixed-term deposits. It includes a limit of 50% for government bonds and deposits that can serve as collateral for stablecoins.

Currently, stablecoin issuers in Japan must match the circulated tokens on a 1:1 ratio with cash deposits in regulated bank accounts. This new rule would give issuers more flexibility to utilize other assets, like certain Japanese and U.S. government bonds, with a remaining maturity of three months or less.

Additionally, the bill aims to create a new category for “intermediary” crypto businesses or brokerages. In Japan, crypto brokerage firms must satisfy the same registration requirements as crypto exchanges to operate domestically. The new bill allows intermediaries to have distinct requirements and anti-money laundering obligations, separating them from exchanges that function differently.