Japan seeks first-mover advantage with stablecoin regulation
Plus, Klarna struggles to get investors to ‘buy now’
Japan forges ahead on stablecoin regulation as cryptomarkets fall
Earlier this month, Japan became the first major economy to impose formal regulation on stablecoins, setting a global precedent while most market observers were preoccupied with the broader crypto meltdown.
The stablecoin bill breezed through the upper house of parliament on June 3. The law legally defines stablecoins — which help underpin the wider realm of cryptocurrency by providing a peg to fiat currencies — as digital currencies and requires that the coins maintain a fixed peg to the yen.
The law also guarantees investors the right to redeem stablecoins at face value, which it aims to do by limiting the institutions that can issue the coins to banks, trust companies and a limited number of money transfer agents.
While the significance of the new regulation was somewhat lost after the collapse of TerraUSD and Luna shook faith in stablecoins and decentralised finance, the move marked a quietly pivotal moment for both progressive and conservative thinking on the issue.
Stablecoin regulation elsewhere may look similar if and when it is laid out. Officials involved in drafting the bill told the FT that the Japanese approach drew heavily upon the debates among financial regulators in the US and UK.
However, critics of the law say that handing this new stablecoin issuance business line to established players will fail to encourage the growth of start-ups that would fulfil the vibrancy Tokyo has long sought as a financial centre.
Casting itself as an early mover on digital assets is part of Japan’s years-long attempt to brand Tokyo as a high-tech financial hub. In 2017, Japan became the first advanced economy to recognise bitcoin as a currency and soon afterwards became the first to set out a licensing system for crypto exchanges.
But while all these legal milestones have been reached with a speed and decisiveness that makes Japan look pioneering, the fundamental motive is the more pragmatic. While the broad mission of Japan’s Financial Services Agency may include awakening the “animal spirits” of a flourishing financial sector, it knows it will bear a massive burden of blame if large numbers of Japanese individuals are burned.
This is a financial regulator that has repeatedly learned the hard way that the praise received for a light touch can never outweigh the public backlash at having left an ageing, bubble-prone public at risk. (Leo Lewis)
Fintech fascination
Klarna struggles to get investors to ‘buy now’ Swedish “buy now, pay later” provider Klarna, once the largest private company in Europe, has had to lower its valuation multiple times during recent negotiations with investors for a fresh round of capital. The deal currently in discussion would value the company at less than half of its last public valuation of $46bn, underscoring how investors have turned on many of the fintech unicorns minted during the pandemic.
Bitcoin drops below key threshold Bitcoin briefly fell below a key support level over the weekend wiping out years of gains for long-term holders. Analysts feared that if the price of the largest cryptocurrency fell below $20,000, it could trigger a wave of forced liquidations adding further pressure on the freefalling crypto market. The price had recovered to $20,819.90 as of Monday afternoon.
Banks build their own tech talent US banks are taking a more hands-on approach to developing technology talent as they try to rely less on third-party providers. With an ongoing labour shortage and war for the available talent, many are launching training programs to fill the gaps from scratch.