Japan Urges Regulators Worldwide to Subject Crypto Exchanges to Bank-Level Oversight

January 19, 2023 Bitcoin.com

Japan set to ease 30% crypto tax on paper profits for token issuers

December 16, 2022 Coin Telegraph

As it stands, Japanese crypto issuers are required to pay a set 30% corporate tax rate on their holdings, even if they haven’t realized a profit through a sale.

The Japanese government is set to ease tax requirements for local crypto firms, as it pushes to stimulate growth in the domestic finance and tech sectors.

At present, Japanese firms that issue crypto are required to pay a set 30% corporate tax rate on their holdings, even if they haven’t realized a profit through a sale. As such, a number of domestically founded crypto/blockchain firms and talent have reportedly chosen to set up shop elsewhere over the past few years.

Japan’s ruling party, the Liberal Democratic Party’s (LDP) tax committee held a meeting on Dec. 15 and approved a proposal — initially tabled in August — which removes the requirement for crypto companies to pay taxes on paper gains from tokens that they have issued and held.

The softer crypto tax rules are expected to be submitted to parliament in January, and go into effect for Japan’s next financial year starting on April 1.

Speaking to Bloomberg on Dec. 15, LDP lawmaker and member of its Web3 policy office Akihisa Shiozaki noted that “this is a very big step forward,” adding that “It will become easier for various companies to do business that involves issuing tokens.”

The latest move from the government appears to signal that its hunger to promote and develop the domestic crypto and Web3 sector hasn’t waned despite the FTX disaster,

Prime Minister Fumio Kishida emphasized in October that NFTs, blockchain and the Metaverse will play important roles in the nation’s digital transformation. The PM cited the digitization of national identity cards as an example.

In October the Japan Virtual and Crypto Assets Exchange Association also announced plans to walk back the stringent screening process for listing new tokens on exchanges, something which Kishida had called on the self-regulatory organization to do back in June.

Such forward thinking sentiments have also been shared by key figures in the private sector. On Dec. 8 banking giant Sumitomo Mitsui Financial Group (SMBC) announced that it is working on an initiative to explore the use cases of soulbound tokens (SBTs).

SBTs refer to a proposal from Ethereum co-founder Vitalik Buterin concerning the use of tokens to represent people’s digital identity.

Japan’s crypto self-regulation ‘experiment’ not working

July 20, 2022 Coin Telegraph

AML

Self-reg entity JVCEA has reportedly received stern warnings to get its act together, as Japan’s Financial Services Agency pushes for the organization to speed up its AML regulation rollout.

Japan’s self-regulation “experiment” for the crypto industry is reportedly not working as well as intended, according to local government and industry experts.

Since 2018, the Japan Virtual Currency Exchange Association (JVCEA), a self-regulation entity, has been tasked with creating guidelines for the country’s crypto industry, with arguments at the time that the entity could be better placed to cope with crypto regulation than a government body.

However, speaking with the Financial Times (FT) on July 18, an unnamed source “close to both industry and government” said that the current model of crypto regulation is faltering:

“When Japan decided to experiment with self-regulation of the cryptocurrency industry, many people around the world said it would not work. Unfortunately, right now it looks as though they may be correct.”

The organization was forged in response to the $530 million hack on the Coincheck exchange in 2018. It is recognized by Japan’s Financial Services Agency (FSA) and has the power to pass and enforce regulatory frameworks for local crypto exchanges.

Its members include a long list of top local crypto names such as Coincheck, BitFlyer and Rakuten Wallet Co, along with the Japanese subsidiaries of FTX and Coinbase.

Over recent months, the JVCEA has reportedly copped a fair amount of flack from the FSA over its slowness in getting regulation off the ground.

According to the FT, the FSA is said to have highlighted key issues with the JVCEA, including its delays in introducing anti-money laundering (AML) regulation and lack of communication between directors, member operators and its secretariat — signaling poor management.

The report also noted that the FSA had already once issued an “extremely stern warning” to the JVCEA in December to get its operations in order and that it was not “clear what kind of deliberations the body was having, what the decision-making process was, why the situation was the way it was, and what the responsibility of the board members was”.

In June, Prime Minister Fumio Kishida also called on the entity to speed up its listing approval process for digital assets on local crypto exchanges but still be “mindful of the need to protect users.”

Another unnamed source close to the JVCEA suggested that the organization is lacking office staff with a genuine knowledge of, or interest in crypto.

According to them, the office is primarily composed of retired bankers, brokers, and government workers, and lacks representatives from the JVCEA’s list of crypto member companies.

“That is why no one there really understands blockchain and cryptocurrencies. The whole mess shows it is not a simple problem of governance. The FSA is very angry about the whole management.”

The JVCEA says it is currently working to make improvements and address the organization’s current issues. However, Meiji University professor and JVCEA board member Masao Yanaga also highlighted that the organization lacks the resources to move quickly.

Yanaga also suggested that AML regulation has been difficult to implement as there is an absence of international agreements concerning the sharing of customer data between crypto exchanges.

“The operators of the exchanges worry that even if we create these rules, they won’t be able to implement them,” he said.

One area that the JVCEA has made slight improvements in this year is its digital asset listing criteria. The entity is tasked with assessing tokens that local companies intend to list however, it has generally taken the JVCEA around six months or more to conduct its screening process.

In March Cointelegraph reported the JVCEA watered down some of its requirements by making a “green list” of 19 assets that no longer require screening, including Bitcoin (BTC), Ether (ETH) and Ripple (XRP).

New Japanese law may allow seizure of stolen crypto

June 7, 2022 Coin Telegraph

Coin Telegraph

Under the current variation of the law, there is no explicit procedure outlined for law enforcement officers to seize illegally obtained crypto from crime organizations.

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.

According to reports from local media outlets such as the Yomiuri Shimbun on June 4, the Justice Ministry will first need to engage in talks with the Legislative Council on the issue before proceeding forward. While it will also need to iron out important details such as how officers can go about obtaining a criminal's private keys.

The talks with the legislative Council could go ahead as soon as next month according to the Jiji Press.

As the specific law focused on the seizure of funds/assets from organized crime does not explicitly outline any procedure concerning illegally acquired cryptocurrencies, there is a concern that criminals may be able to continue illicit behavior via their unseized digital asset holdings.

As it stands, the law only outlines that the type of assets that can be seized are physical property, monetary claims, and movable assets such as machinery, vehicles, tools, and supplies, with crypto falling under none of those categories.

Once the finer details have been set, the amendment to the law would need to be approved by the cabinet and then signed off by parliament, and may not meet much resistance given the nature of such a proposal.

The report comes just days after Japan’s parliament passed a bill to ban stablecoin issuance by non-banking institutions as part of a push to reduce system risk and provide greater consumer protections.

Under the bill, only licensed banks, registered money transfer agents, and local trust companies can develop and issue stablecoins.

Japan crypto regulation