The market scale of stablecoins has reached 3 trillion yen, with issues of improper use emerging.
On June 30, the Financial Services Agency of Japan announced the 'Analysis Report on the Sound Development of Stablecoins,' which was executed by KPMG. The agency emphasized that this is not an official opinion. The report points out that as the presence of stablecoins in the market increases, concerns regarding their improper use have also arisen, leading to a reality check to promote sound development in the future.
According to the report, stablecoins have the advantage of avoiding price volatility risks compared to traditional cryptocurrencies, enabling rapid and low-cost remittance and payment functions. The use by individuals, businesses, and institutional investors is rapidly expanding; as of January, the global market value of stablecoins has exceeded $210 billion, approximately 3 trillion yen.
Source: Financial Services Agency of Japan. The global market value of stablecoins has exceeded $210 billion, approximately 3 trillion yen.
However, the report also warns that the anonymity and immediacy characteristics of stablecoins are being abused, and the situation of improper use is on the rise.
The Financial Services Agency expressed its hope to maximize the potential of stablecoins by grasping relevant realities and risks. The report specifically mentioned that in recent years, the analysis of transactions related to economic sanctions has become increasingly in-depth, and international attention to the improper use of stablecoins is continuously rising.
Bitcoin remains the mainstream for improper use, and stablecoin regulation requires multi-party cooperation.
The survey results show that Bitcoin remains a widely used tool for improper use, but the proportion of stablecoins in transaction amounts related to sanctioned organizations and fraudulent activities has shown a higher trend. However, the report emphasizes that this does not mean that the expansion of stablecoin usage directly leads to an increase in improper behavior; the instantaneous exchangeability with cryptocurrencies needs to be considered to grasp the full picture.
Source: Financial Services Agency of Japan. Bitcoin remains a widely used tool, but the proportion of stablecoins in transaction amounts related to sanctioned organizations and fraudulent activities has shown a higher trend.
Regarding measures against the improper use of stablecoins, the report suggests that token issuers can utilize measures such as blacklisting, but points out that what issuers can do alone is limited and requires cooperation with blockchain analysts and regulatory authorities. As stablecoins have expanded their functions to the exchange of goods and services, the adoption by payment providers and merchants is also increasing, and it is hoped that relevant stakeholders will take appropriate measures based on their respective roles.
The report particularly focuses on the anonymity feature of stablecoins, considering it an industry that requires regulatory attention. While anonymity provides privacy protection for users, it also facilitates illegal activities. How to balance the protection of legitimate users' rights and the prevention of improper use has become an important issue faced by regulatory agencies.
The six major reform issues have been announced, with governance structure being the top priority.
The report presents six major issues to be addressed in the future, including:
Clarification of governance structure
Strengthening risk management
Regulatory framework improvement
Strengthening user protection
Addressing technical risks
Handling cross-border transaction issues
In terms of governance, the report points out the need to promote the standardization of governance models for stablecoin issuers and to establish a structure that ensures the transparency and auditability of decision-making processes. In terms of risk management, the current assessment of the value stabilization mechanism of stablecoins is inadequate, and it is necessary to introduce a regular audit system for collateral assets and to establish risk assessment criteria.
Strengthening user protection covers aspects such as fraud prevention and wallet security, while addressing technical risks focuses on threats such as programming errors and hacking attacks. The issue of cross-border transactions reflects the importance of regulatory coordination among countries under the trend of global stablecoin usage.
In February of this year, the Financial Services Agency of Japan proposed a comprehensive reform plan related to cryptocurrencies and stablecoins. In addition, the authorities have shown a policy of relaxing the restrictions on the use of stablecoin funds. Besides the current demand deposit requirements, in the future, it will allow short-term government bonds or specific time deposits to serve as collateral for stablecoin funds, indicating Japan's more open attitude towards the development of the stablecoin market while strengthening risk control mechanisms.
This content has been compiled by Crypto Agent from various sources and reviewed by (Crypto City). It is still in the training stage and may contain logical biases or information errors. The content is for reference only and should not be considered as investment advice.
This article titled 'The Financial Services Agency of Japan releases stablecoin report! Proposes six major reform directions, with anonymity becoming a regulatory focus' was first published in 'Crypto City.'
