Japan considers changes to crypto rules as FSA launches review: report

Reports have emerged that Japan plans to evaluate the effectiveness of its cryptocurrency rules.

The review, which will take place over the next few months, could pave the way for the launch of crypto exchange-traded funds (ETFs) in the country.

Review to assess investor protection

The news was first reported by Bloomberg, which cited an unnamed official from Japan’s Financial Services Agency (FSA). According to the report, the review will measure how adequate the country’s current approach to crypto regulation under the Payment Services Act (PSA) has been.

Originally enacted in 2009, Japanese lawmakers have amended the PSA several times to address changes in the financial services landscape brought about by the emergence of digital currencies.

The act recognizes Bitcoin (BTC) and other cryptocurrencies as legal property. It also requires crypto exchanges to be registered and comply with the country’s anti-money laundering (AML) and counter-financing of terrorism (CFT) obligations.

In addition, Japan’s Financial Instruments and Exchange Act (FIEA) also plays a key role in the regulation of digital assets, especially regarding crypto derivatives transactions. The FSA wants to check whether these rules have effectively protected investors, given that Japanese holders mainly use cryptocurrencies as investments rather than payments.

According to Bloomberg, this move could lead to changes in laws or even a reclassification of digital assets as financial instruments under the FIEA. If this were to happen, analysts suggest it would not only improve investor protection measures, but could potentially make it easier for the industry to negotiate lower taxes on crypto.

Potential Reforms for Crypto Tax and Security

The country’s strict cryptography rules were designed to protect against events like the hack of Mt. Gox and the subsequent bankruptcy, as well as the FTX debacle of 2023 to prevent it from happening or adversely affecting local crypto holders.

Just recently, crypto exchange DMM Bitcoin lost over $300 million in BTC to hackers. The platform later stated that it would refund all users who lost their crypto in the attack and would acquire a proportional amount of the stolen BTC.

Following the attack, the FSA required DMM Bitcoin to provide the regulator with a business improvement plan by the end of October that would outline how it intends to protect customer assets going forward.

Japan has already made some concessions to its crypto tax requirements. In June 2023, its National Tax Agency published a partial revision of its corporate tax guidelines that exempted companies issuing crypto tokens from paying a 30% tax on their holdings.

Prime Minister Fumio Kishida has also been at the forefront of promoting Web3, a future iteration of the Internet that is expected to be built around the blockchain and use crypto. This has led to some of the country’s biggest corporations, such as Sony and Mitsubishi Bank, getting into the business.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!