Japan must promote usage of yen-based stablecoins for settlement in Asia, ruling party panel says.

TOKYO, June 1 (Reuters) - Japan must promote usage of yen-based stablecoins for settlement in Asia and create a legal framework to allow trading of crypto exchange-traded funds (ETF), a ruling party panel said in a proposal ‌to the government on Monday. "Crypto-ETFs would provide investors with easy-to-understand ways of investment," the proposal said, calling on the government to position the product as an official means of investment in the financial market. Sign up here. The Liberal Democratic Party's (LDP) panel on promotion of blockchain technology submitted the proposal to Finance Minister Satsuki Katayama, ⁠who also oversees Japan's financial regulator, the Financial Services Agency (FSA). Japan can promote yen stablecoins and steps it is taking on blockchain innovation when it hosts the Asian Development Bank's annual meeting in May next year, Junichi Kanda, a lawmaker in the panel, told reporters after meeting Katayama. "We urged the government to take steps to promote yen stablecoins for settlement in Asia in the future," he said. A crypto ETF is a financial product that allows investors to gain exposure to cryptocurrencies without directly ‌owning ⁠or managing the underlying digital assets. The FSA has been promoting efforts by domestic financial institutions to use blockchain technology for innovation and streamlining of operations. Japan's three largest banks have announced a project, backed by FSA, to experiment jointly issuing stablecoins. Domestic startup JPYC began issuing stablecoins pegged ⁠to the yen in October in a significant move in a country where many consumers still prefer traditional payment methods. Stablecoins pegged to the dollar have surged with strong backing from U.S. ⁠President Donald Trump. Policymakers have warned stablecoins could facilitate the movement of funds outside regulated banking systems and undermine the role of commercial banks in global ⁠payment flows. Bank of Japan Deputy Governor Ryozo Himino last month called for a "holistic approach" in designing the global future monetary system that does not confine options to central bank digital currencies and stablecoins. Reporting by Leika Kihara; Editing by Alexandra Hudson

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