Japan has become one of the first countries to regulate stablecoins in the wake of the implosion of TerraUSD. The Japanese parliament passed a bill on 3 June defining stablecoins as digital money, clarifying their legal status. Under the new law, stablecoins must be linked to the yen or another form of legal tender and must also guarantee holders the right to redeem them at face value. Importantly, stablecoins can only be issued by licensed banks, registered money transfer agents and trust companies. The law is silent on the treatment of asset-backed stablecoins issued by overseas entities, such as Tether, and algorithmic stablecoins. The move by the Japanese lawmakers is in line with steps by governments worldwide to introduce a legal framework around stablecoins following the losses triggered by the collapse in the price of TerraUSD.