Japan’s FSA Says Stablecoins Are Not Considered Cryptocurrencies Based on Current Legislation
The Financial Services Agency is the top financial regulator in Japan, and they recently release a report to Bitcoin News exclusively to dictate the way that they classify stablecoins. More specifically, they stated that stablecoins are not categorized as cryptocurrencies, based on two particular pieces of legislation.
In the Fund Settlement Law and the recently amended Payment Services Act, Japan’s authorities clearly outline certain requirements that “virtual currencies” must meet to be considered as such. The former document contains the definition of “virtual currencies,” which is specific to cryptocurrencies, making them exempt from a consumption tax. The second legislation provides a requirement to any operator of a crypto exchange to establish themselves by registering with the FSA.
Since the use of fiat-based crypto, or “stablecoins,” are becoming more popular, Bitcoin News inquired how the FSA plans for them to be treated. The FSA said, “In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.”
GMO, an internet giant of Japan, made an announcement on October 9th that it “will start full-scale preparations to issue stable coins of virtual currency.” Their subsidiary, GMO Coin, is one of the registered exchanges in Japan. Right now, Japan has 16 crypto exchanges registered, though there are three others in the works that they are permitting to function during the review process.
The regulator explained further to Bitcoin News about stablecoins, saying, “Due to [stablecoin’s] characteristics, it is not necessarily appropriate to suggest what those companies need to obtain or register before issuing stable coins.” They added, “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.”
Right now, there are two types of prepaid payment instruments – the ones used for personal businesses and the ones used for third-party businesses. Each of the payment instruments have to adhere to different requirements with reporting and registration.
The Bank of Japan noted that, with fund transfer service providers, “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],” but only without a banking license. They added,
“In other words, fund transfer transactions of over one million yen are still handled exclusively by banks. 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.”