Japan Leads the Way on Stablecoin Regulation, But Faces Hurdles in Balancing Security and Profitability

Japan has become a leader in regulating stablecoins with a new law that took effect in June. This shows stablecoin regulation is possible, unlike in the U.S. where no law has passed.

But regulating stablecoins is challenging. Issuers in Japan are just starting from scratch and face hurdles like getting licensed, ensuring assets are secure, and building profitable business models.

Stablecoins must be backed 100% by yen or dollars held in Japan. This ensures security but makes earning interest difficult with low Japanese interest rates.

Major players like Binance and Circle plan to launch in Japan but the process takes time. The first stablecoins likely won't debut until June 2023 at the earliest.

Japan must strike a balance between security and profitability. How it navigates these challenges will be important to watch as a model for global stablecoin regulation.