The regulatory features of stablecoins in Asia

Stablecoins are cryptocurrencies pegged to fiat currencies or other assets, such as gold or commodities. They are used for various purposes, including storing value, payments, and trading.

In recent years, there has been a growing popularity of stablecoins, including in Asia. This region has seen active regulation of stablecoins by governments and financial regulators.

Regulation of Stablecoins in China

The regulation in China stands as one of the strictest worldwide. In 2021, the People's Bank of China (PBOC) prohibited all cryptocurrency operations, including stablecoins. This decision aimed to protect citizens' financial interests and ensure financial stability. As per the PBOC ban, all operations involving stable cryptocurrency in China are considered illegal. This encompasses buying, selling, exchanging, transferring, and storing stablecoins. Penalties and other punitive measures are imposed for violating the ban.

The PBOC's prohibition significantly impacted the stable cryptocurrency market in China. Trading volumes in China plummeted, leading many Chinese firms associated with stablecoins to exit the business. However, despite the ban, they continue to be used in China on a smaller scale. Some Chinese citizens and companies utilize stablecoins to circumvent the PBOC's restrictions.

In the future, there might be a possibility of China easing regulations on stable cryptocurrency. Nevertheless, considering the current stance of the PBOC, this appears improbable.

Regulation of Stablecoins in Japan

The regulation in Japan stands as one of the most progressive globally. In 2018, Japan enacted the Financial Services Act, which regulates the issuance and circulation of stablecoins.

According to this law, stable cryptocurrency must be issued by a licensed company and backed by fiat currencies or other assets. The company issuing them must adhere to specific requirements, including capital and risk management standards.

In Japan, the issuance of stablecoins is permitted only for the following categories of companies:

• Banks
• Registered money transfer operators
• Trust companies

In 2022, the Financial Services Agency (FSA) introduced a series of additional measures to regulate stable cryptocurrency. These measures were implemented in response to the collapse of the TerraUSD. Particularly, the FSA mandated that companies issuing stablecoins must back them with reserves amounting to at least 100% of their nominal value. Additionally, these companies must provide information about their reserves and risk management to the FSA. These measures aim to enhance stability in the crypto market and protect investors.

Overall, the regulation of stablecoins in Japan is geared towards developing this market while ensuring its safety.

Regulation of Stablecoins in South Korea

Regulation in South Korea is a relatively recent development. Until 2023, stable cryptocurrency were not governed by any laws or regulations. However, in June 2023, the South Korean parliament passed the Digital Asset Users Protection Act, introducing regulations for stablecoins.

Under this law, stable cryptocurrency are classified as 'financial assets,' subjecting them to the same rules and standards as other financial assets such as stocks, bonds, and currencies.

The Digital Asset Users Protection Act came into effect in September 2023. Since then, the Financial Services Commission (FSC) has issued licenses for stablecoin issuance to several companies, including Terraform Labs, the issuer of the TerraUSD.

Regulation of stablecoins in South Korea is one of the strictest globally, aiming to protect investors and ensure financial system stability.

Here are some key points regarding the regulation in South Korea:

• Stable cryptocurrency are classified as 'financial assets.'
• The stablecoin issuer must be registered with the FSC.
• Stablecoins must be backed by real assets.
• The backing percentage must be at least 100%.

This regulation is relatively new, and its impact on the stable cryptocurrency market in South Korea is yet to be fully assessed.

Regulation of Stablecoins in Other Asian Countries

In other Asian countries, the regulation of stablecoins is in the developmental phase:

• Singapore: In 2022, Singapore enacted a law regulating the issuance and circulation of stablecoins. This law mandates that the stablecoin issuer be registered with the Monetary Authority of Singapore (MAS). The issuer must also meet specific requirements, including having adequate capital, ensuring asset safety, and complying with anti-money laundering rules.
• India: In 2023, India passed a law classifying stablecoins as 'digital financial assets.' This law requires the stablecoin issuer to be registered with the Reserve Bank of India (RBI). The issuer must also meet specific requirements, including having adequate capital, ensuring asset safety, and complying with anti-money laundering rules.
• In other countries like Thailand, the regulation of stable cryptocurrency is yet to be developed.

Conclusion

Overall, the regulation in Asia is aimed at protecting citizens' financial interests and ensuring financial stability. In most Asian countries, stablecoins must be issued by a licensed company and backed by fiat currencies or other assets.

It is expected that the regulation of stablecoins in Asia will continue to evolve in the coming years.