Crypto Regulations in Japan
Japan has one of the most progressive and developed regulatory regimes for cryptocurrencies. Cryptocurrency exchanges must be registered and comply with traditional AML/CFT and other regulations. They are regulated under the Payment Services Act (PSA), which defines “cryptocurrency” as a property value and not a legal tender. The PSA defines “crypto-assets” as payment methods that are not denominated in fiat currency and can be used to pay unspecified persons.
In December 2017, Japan’s National Tax Agency98 ruled that gains on cryptocurrencies should be categorized as “miscellaneous income” and taxed accordingly. There have been several new regulations and amendments to the PSA, and to the Financial Instruments and Exchange Act99 (FIEA), introducing the term “crypto-asset,” and regulating crypto derivatives trading. Cryptocurrency custody service providers (that do not sell or purchase crypto-assets) fall under the scope of the PSA, while cryptocurrency derivatives businesses fall under the scope of the FIEA.
In April 2020, Japan was the first country to create self-regulatory bodies, the Japanese Virtual Currency Exchange Association100 (JVCEA) and the Japan STO Association101. The JVCEA and the STO Association promote regulatory compliance and play a significant role in establishing best practices and ensuring compliance with regulations.
Source: Thomson Reuters
Yes, cryptocurrencies are legal in Japan. The Payment Services Act defines “crypto-assets” as payment methods that are not denominated in fiat currency and can be used to pay unspecified persons. There are no restrictions on owning and investing in cryptocurrencies.
Source: notabene.id
Japan currently has the world’s most progressive regulatory climate for cryptocurrencies and recognizes Bitcoin and other digital currencies as legal property under the Payment Services Act (PSA). Following those regulations, crypto exchanges in Japan are required to be registered and comply with traditional AML/CFT obligations. Japan is the world’s biggest market for Bitcoin and, in December 2017, the National Tax Agency ruled that gains on Japan’s cryptocurrency should be categorized as ‘miscellaneous income’ and investors taxed accordingly.
Source: Comply Advantage
Japan’s crypto-asset regulations allow users to buy, sell and own crypto assets. Purchasable from exchanges, ‘Bitcoin ATMs’, and one another.
Alongside having a long, rich history of technological innovation, Japan is a global financial hub. The country’s laws and business environment are thus highly conducive to blockchain technology, with many DLT-native businesses operating in Japan, including Coinfirm. On a per-capita basis, the country has one of the highest adoption rates of the technology. Japan is currently trialing the use of a CBDC (Central Bank Digital Currency) of the Yen (JPY).
Additionally, Japan has been a member of the Financial Action Task Force (FATF) – the global financial regulatory watchdog – since 1990, and as such closely aligns its compliance laws surrounding anti-money laundering (AML) and combatting the financing of terrorism (CFT) to the FATF’s recommendations.
Source: Coin Firm
Japan considers crypto earning over JPY200,000 to be “miscellaneous income,” which means they can be taxed at rates up to 55%. This includes permanent residents’ profits from cryptocurrency trading, bitcoin mining, and DeFi lending. Considering that Japan taxes stock profits at a flat 20%, its crypto tax rates are very high.
Non-permanent residents of Japan pay a flat 20% tax on all income earned in Japan.
All individual taxes are filed based on the previous year ending 31 December, and they need to be reported by 15 March of the next year. However, there are crypto tax extension options.
The high tax on cryptocurrency has led many in Japan to underreport their earnings. In response, Japan has increased crypto tax investigations.
CoinDesk reports that according to the Asahi Shimbun, in 2019 roughly 50 individuals and 30 companies in Japan were found to have failed to properly declare crypto income from the past few years.[1] Investigators focused particularly on entities that appeared to have made significant crypto gains, concluding that many had made efforts to conceal their total earnings.
SourceToken Tax
Cryptocurrency is viewed as property and is taxed in the Japan States as Miscellaneous Income, under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA).
You won’t pay tax when you buy crypto, hold crypto, or move your crypto between wallets. In addition, the NTA does not yet distinguish between individuals and businesses when it comes to cryptocurrency taxes.
If you’ve bought or sold cryptocurrency in the last financial year and made more than 200,000 JPY, you’ll need to declare your crypto totals on your Income Tax return.
Source: koinly.io
Japan’s cryptocurrency exchange regulations are similarly progressive. Under the PSA, only businesses with a competent local Financial Bureau are allowed to operate as a cryptocurrency exchange, however, in keeping with Japan’s progressive stance, foreign cryptocurrency exchanges are permitted to register where they can demonstrate an equivalent registration standard in their host country.
While exchanges are legal in Japan, after a series of high-profile hacks, including the notorious Coincheck heist of $530 million in digital currency, crypto regulations have become an urgent national concern. Japan’s Financial Services Agency (FSA) has stepped up efforts to regulate trading and exchanges of cryptocurrency in Japan: amendments to the PSA require cryptocurrency exchanges to register with the FSA in order to operate – a process that can take up to six months and which imposes stricter requirements around both cybersecurity and AML/CFT. In Japan, exchange-based regulations are primarily aimed at protecting market integrity, users, investors, and exchanges must observe certain record-keeping requirements and provide the FSA with an annual report. Subsequent amendments in 2016 and 2019 updated this requirement to include checking customer identification and covering custodian services providers.
Source: Comply Advantage
Japan’s crypto exchange regulations are developing. Only companies with a highly qualified Financial Bureau are permitted to exist as cryptocurrency exchanges under the PSA, but international cryptocurrency exchanges are permitted to work if they can prove an equivalent registration standard in their host country, in maintaining Japan’s progressive attitude.
While exchanges are allowed in Japan, crypto laws have become a national priority after a succession of high-profile breaches, including the $530 million digital currency robbery known as the Coin check heist. The Financial Services Agency (FSA) of Japan has increased its efforts to enforce trading and exchanges. Amendments to the PSA now necessitate cryptocurrency trading to sign up with the FSA in order to operate – a process that can take up to six months and enforces stricter cybersecurity and AML/CFT requirements. Exchange-based rules in Japan are largely geared at safeguarding market integrity, and users, investors, and exchanges must adhere to specific record-keeping standards and submit an annual report to the Financial Services Agency (FSA). Following revisions in 2016 and 2019, this requirement was expanded to incorporate client identity checks and to include custodial services providers.
Source: Sanction Scanner
On June 3, 2022, Japan became the first developed country to recognize and legalize stablecoins, defining them as ‘digital money. The bill was initially drafted by Japan’s Financial Services Agency (FSA) in December 2021. It then made its way into the Parliament by March 2022 before being backed by a majority vote on Friday. The primary focus of the bill is investor protection and it will be enforced in 2023.
The move comes right after the Terra UST catastrophe last month that uprooted billions of dollars from the crypto market. However, it seems like the bill has been in the works for a while now, with FSA having already highlighted the need for “a higher level of regulatory discipline” in one of its papers last year.
Stablecoins, by design, are pegged to a fiat currency such as the USD, GBP, etc., or even gold. They are inherently stable, which is why traders use them to enter or exit their positions in other cryptocurrencies on token swapping protocols like Curve or Uniswap.
Source: cnbctv18
On Jan 26, 2018,
- Japanese cryptocurrency exchange Coincheck says Friday that around 523 million of the exchange’s NEM coins were sent to another account around 3 a.m. local time.
- The stolen coins were worth about 58 billion yen at the time of detection, or roughly $534.8 million, according to the exchange.
- Coincheck management says it held the NEM coins in a “hot” wallet, referring to a method of storage that is linked to the internet.
Hackers stole more than half a billion dollars in cryptocurrencies from Japanese exchange Coincheck last week — and experts say investors can expect more such attacks.
In the last month, hundreds of frantic people have called McCann Investigations in Houston. Some have lost their cryptocurrencies. Others had them stolen.
Wallet Recovery Services, which helps people find their lost cryptocurrencies, warns website visitors to expect a slow response time due to its “high volume of new requests.”
Here are some tips from experts for holding on to your crypto cash.
- Be careful where you do business
- Store your virtual currency offline
- Back up your back up
Japan’s Justice Ministry is reportedly considering a revision of an asset seizure law relating to organized crime to include a stipulation that crypto can be commandeered in such instances.
If the reports are found to be true, a potential revision of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime (1999) would enable law enforcement officers and courts to take control of crypto assets used in criminal activity such as money laundering.
Source: Cointelegraph
Tokyo, June 6 (Jiji Press)–Japan’s Justice Ministry is considering revising a law targeting organized crimes to clearly stipulate that crypto-assets illegally acquired by criminal organizations and others are subject to confiscation.
At present, the law on the punishment of organized crimes does not stipulate how to handle illegally acquired crypto assets. Criminal organizations may take advantage of this and use crypto assets for money laundering and other crimes.
In order to ensure confiscation of all criminal assets, the ministry will ask for an opinion from the Legislative Council, which advises the justice minister, as early as this month and begin detailed talks to revise the law.
Source: Nippon
The Government of Japan (GOJ) introduced this framework on June 6, 2018, as one of the mechanisms for regulatory reform to facilitate the realization of innovative technologies and business models in Japan. l The framework does not limit the area of regulations but covers those on financial services, healthcare industry, mobility, and transportation. l Companies, including overseas companies, can Ø apply to conduct “demonstrations” under this new framework and Ø test the possibilities of using innovative technologies such as AI, IoT, or blockchains for future business, especially when they cannot start businesses due to existing Japanese regulations
Source: jetro.go.jp
In June 2018, the Government of Japan introduced the sandbox regime to accelerate the introduction of new business models and innovative technologies. Organizations and companies both in and outside Japan can apply to demonstrate and experiment with new technologies such as blockchain, artificial intelligence, and the Internet of Things (IoT) in fields such as financial services, healthcare, and transportation.
Unlike Japan’s National Strategic Special Zones such as Fukuoka City, sandbox experiments take place in virtual spaces and are not limited to geographical regions. The purpose of the sandbox, however, is to check whether the new business will work in the real market. After the government evaluates the results of these trials, it plans to introduce deregulation measures. The sandbox system is thus a key policy under the Government’s reform-oriented Abenomics policies.
“Our sandbox regime is open to everybody and we try to make it possible for everyone to experiment as fast as possible,” says Hirohiko Nakahara, a counselor in the Economic Revitalization Bureau of Japan’s Cabinet Secretariat. “We must prove there’s a social benefit and that a new business is acceptable and practicable. The important thing is to make our market attractive.”
Source: Forbes
