Japan looking to limit stablecoin issuance to select entities

Stablecoins are the most preferred form of payment in the crypto industry due to their value being stable and not affected by volatility and this has led to several billions worth of stablecoins in circulation.

Increased Risk of Failure

This has also increased the risk of failure to a great extent as no one seems to be very sure on what is backing many of the stablecoins and how fragile those assets are, in the long run. The most used stablecoin, USD Tether, is said to be backed by commercial paper but with many corporates going into deep debt and some major companies also staring at bankruptcy, nothing seems to be safe at the moment.

This is likely to be a matter of huge concern for the central banks apart from the fact that the transfer of stablecoins is not under the control of the regulators who do not have any oversight as well. Due to all these factors, the central banks would be looking to exercise more control over them and this seems to be one form of the regulations and measures that would be undertaken by them.

Regulators Looking to Control

The regulators around the world are seriously looking into how the crypto industry can be regulated as a whole and they would likely be learning from each other on the best way forward and this approach could be useful for them as it limits the issuance and hence the usage of the stablecoins as a form of payment.

This could pose a risk to those who are issuing stablecoins at the moment as this would mean that the users would then be forced to use digital currencies issued by the banks rather than the different crypto and stablecoin companies, which is the case now. But for some, like Circle which issues the USDC stablecoin, it may not be too much of a risk anyway as the company proposes to become a bank anyway.