Japan’s top financial regulator, the Financial Services Agency, has exclusively explained to news.Bitcoin.com how stablecoins are treated under current Japanese law. In addition to emphasizing that they are not virtual currencies, the regulator clarified the registration requirements for their issuers and dealers.
Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space
Not Virtual Currencies
Japan’s amended Fund Settlement Law and the amended Payment Services Act which went into effect in April last year regulate the country’s crypto industry. The former defines “virtual currencies,” which include cryptocurrencies, as a means of payment and exempts them from consumption tax. The latter requires cryptocurrency exchange operators to register with the Financial Services Agency (FSA).
With the global rise in popularity of fiat-pegged cryptocurrencies, commonly referred to as stablecoins, news.Bitcoin.com asked the FSA how these coins are treated under Japanese law. The regulator clarified:
In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.
On Oct. 9, Japanese internet giant GMO announced that it “will start full-scale preparations to issue stable coins of virtual currency.” GMO Internet’s subsidiary, GMO Coin, operates one of Japan’s 16 registered crypto exchanges. The country also has three other crypto exchanges that the FSA has allowed to operate while their applications are being reviewed.
The FSA further explained to news.Bitcoin.com that “Due to its [stablecoin’s] characteristics, it is not necessarily appropriate to suggest what those companies need to obtain or register before issuing stable coins.” Nonetheless, the regulator described:
Generally speaking, companies need to register as the ‘Issuer of Prepaid Payment Instruments’ or the ‘Funds Transfer Service Providers’ based on Payment Services Act, when virtual currency broker dealers trade stable coins.
There are two types of prepaid payment instruments: those for one’s own business and those for third-party businesses, according to the FSA. Each has its own reporting and registration requirements.
As for fund transfer service providers, the Bank of Japan detailed, “under the Payment Services Act, those registered as fund transfer service providers may perform fund transfer transactions of up to one million yen [$9,000]” without a banking license. “In other words, fund transfer transactions of over one million yen are still handled exclusively by banks,” the FSA elaborated, noting:
When a person/an entity engages in exchange transactions of one million yen equivalent or less in the course of trade, registration as a funds transfer service provider is required. For exchange transactions exceeding one million yen, a license for banking business pursuant to the ‘Banking Act’ is required.
How do you think stablecoins should be treated under Japanese law? Let us know in the comments section below.
Images courtesy of Shutterstock.
Need to calculate your bitcoin holdings? Check our tools section.