Japanese Financial Regulator Classify Cryptocurrencies as “Crypto-Assets” to Ward off Consumer Misunderstanding
Japan’s financial regulator has established a classification for cryptocurrencies that are traded online like money, this according to a report from The Japan News on December 15, 2018.
According to the article, the nation’s Financial Services Agency (FSA) has decided to position bitcoin and other cryptocurrencies under the category of “crypto-assets.” Furthermore, the intention behind the move is to clarify that the government does not recognize them as legal-tender; a panel of advisors to the FSA suggested in a report submitted (Dec. 14th), that the term “virtual currency” has the potential to cause a misunderstanding.
Also, the FSA will be revising laws and regulations such as the Payment Services Law based on this advisory panel’s report; in doing so, the agency intends to request the implementation of “strict management systems” from crypto-asset handling enterprises. It also highlighted the need for a mechanism that protects crypto-asset users in the event of particular problems, such as cash outflow.
The approach taken by the FSA in this instance is less radical than that of other nations who are scrambling to establish a legal classification for digital currencies, which in turn would allow for numerous regulatory hurdles to be overcome.
For example, this year the United States Securities and Exchange Commission (SEC) contentiously classified cryptocurrencies outside of bitcoin and ethereum as securities, which in turn has led to a string of rather aggressive in their clampdowns of initial coin offerings (ICOs), and even the promotion of ICOs in the wake of the DJ Khaled / Floyd Mayweather ICO scandal.
Though the move comes in a bid to battle corruption, fraud and bolster consumer protections in the space, it has been met with a great deal of scrutiny from U.S Judges who have contested the SEC’s classification, as well as investigations which firmly argue that treating ICO issued tokens as securities is pushing domestic startups to seek greener pastures.
Comparatively, Japan’s FSA recently decided to empower domestic cryptocurrency businesses with self-regulatory authority; this directive was passed on to the Japan Virtual Currency Exchange Association (JVCEA), a consortium of local cryptocurrency exchanges, who can now “police, raid and sanction nefarious” activities. To further protect investors, the FSA is preparing to “launch a transparent ICO regulatory framework“, further signaling Japan as a bullish-blockchain contender for 2019.
One of the most interesting takeaways from this decision is the recent declaration from the FSA that stablecoins like Tether (USDT), Gemini Dollar (GUSD), USD Coin (USDC) and Paxos Standard (PAX) are not cryptocurrencies, but instead under the law are pre-paid payment instruments.
At the time, the FSA stated:
“In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.”
By the rest of the world’s expectations, Japan is a bustling crypto-nation, though according to an article written by BTCManager’s Chief Editor Liam J. Kelly, it “isn’t all that it’s cracked up to be.” Having visited the crypto-country, what he found was positive sentiments in the lingering fallout of major crypto-exchange hacks, and crypto-investors who use cryptocurrency meetups as a way to promote the acceptance and adoption of bitcoin cash in places such as bars and restaurants.
Liam writes that crypto-payment adoption Is “crucial” for the wider community, though very few utilize their crypto within their local economy, which is widely believed to be down to Japan’s capital gains tax laws which on occasion can be extremely high.