Crypto Regulation in Japan

For a long time, Japan has been a potential and extremely vibrant financial market. The government has introduced the Japan crypto regulation to ensure effective management of the cryptocurrency financial market. Join Klarda to learn about the main contents of Japan crypto regulation.

KEY TAKEAWAYS

• Japan crypto regulation is quite comprehensively introduced by the Japanese government
• These regulations apply to entities such as service providers, derivatives companies, trading floors,...
• These regulations will give you issues related to Banking, how to buy cryptocurrencies, how cryptocurrencies are managed, and taxes applicable to cryptocurrencies.

CONTEXT OF APPLYING CRYPTOCURRENCY REGULATIONS IN JAPAN

Japan has been one of the world's centers of crypto finance since the early days of cryptocurrency. The Japanese have realized the potential to invest in this market and deploy Bitcoin mining. Mt.Gox was one of the Japanese companies pioneering in establishing cryptocurrency exchanges in the world at that time.

In February 2014, although Mt. Gox hacked a large amount of money, but the Japanese government still did not completely reject this currency. Instead, the Japanese government implemented strict Japan crypto regulation. By 2016, Japan officially recognized cryptocurrency as an asset class. In April 2017, the Payment Services Act (PSA) was passed by the country. Japan crypto regulation regulates transactions, obligations and responsibilities of parties, as well as makes modifications and updates.

Despite being at the forefront of actively introducing crypto regulation, as of 2019, all of Japan had about 4% of residents owning cryptocurrencies. The reason why cryptocurrencies are not growing in the country is said to be due to the stability of the Yen.

However, after the worldwide Covid-19 pandemic, cryptocurrency is increasingly gaining interest because of its versatility. The Japanese government was also the first to award NFTs to seven mayors for their reforms to the country's sector in September 2022. Additionally, tying the Yen to stablecoins is considered a turning point big for the country's cryptocurrency market. JPYcoin users can pay for their orders on Amazon.

In short, the cryptocurrency market in Japan is considered lucrative and extremely competitive. Furthermore, Japan crypto regulation issued from the beginning also ensures the safety of the market from fraudulent schemes.

DO BANKS IN JAPAN ALLOW CRYPTOCURRENCY TRADING?

From the beginning, cryptocurrency was considered not to be legal tender because it was not issued by central banks. Later, when realizing the potential of this currency, banks turned to creating separate currencies as well as applying blockchain technology to improve operations.

Banks strictly follow Japan crypto regulation and will only conduct cryptocurrency transactions if you meet KYC requirements for at least 7 years. In addition, Japan crypto regulation also requires explaining transactions worth up to 30 million JPY to the competent authority, the Ministry of Finance.

HOW TO BUY CRYPTOCURRENCY IN JAPAN?

The exchanges have been strictly censored by Japan crypto regulation, investors can freely choose the exchange they think is suitable. Before making a cryptocurrency purchase, you must go through some procedures such as KYC confirmation, filling in your credit or debit card information in the e-wallet you downloaded. After ensuring the above procedures are followed correctly, you can trade the cryptocurrency of your choice.

IN JAPAN, HOW ARE CRYPTOCURRENCIES REGULATED?

Cryptocurrencies in Japan are regulated by the Japan Financial Services Agency (FSA), Japan Virtual Currency Exchange Association (JVCEA), Japan Security Token Offering Association (JSTOA). The JVCEA's mission is to provide policies and rules for cryptocurrency service providers. JSTOA is responsible for overseeing and managing token offerings and organizing crowdfunding events.

These agencies have cooperated with each other and enacted the following laws:

• The Payment Services Act (PSA): is the Japan crypto regulation that regulates cryptocurrencies as assets that are not issued by the government and are payable only to unknown persons. It also stipulates that cryptocurrency service providers must register with the competent authority.
• The Financial Instruments and Exchange Act (FIEA): provides regulations for derivatives companies.
• Act for Prevention of Transfer of Criminal Proceeds (APTCP): ensures exchanges in Japan comply with this act regarding AML regulations. The implementation of this law is overseen by the Financial Intelligence Unit (FIU) and the Japan Financial Intelligence Center (JAFIC).

Exchanges, companies providing cryptocurrency services as well as derivatives companies, etc. must ensure implementation of Japan crypto regulations. This will be controlled by record keeping entities. and submit annual reports to the FSA.

DOES JAPAN ALLOW CRYPTOCURRENCY TRADING?

Companies that want to participate in the cryptocurrency market must ensure the following conditions:

• Register with the FSA and obtain an operating licence
• Ensure compliance with AML standards
• Meets requirements for anti-terrorism measures.

In addition, Japan crypto regulation also requires advertising restrictions for cryptocurrencies. It mentions prohibited activities as well as requires exchanges to ensure security measures for user information and data.

DOES JAPAN CRYPTO REGULATION HAVE ANY TAX REGULATIONS?

Japan's National Tax Agency (NTA) defines income from cryptocurrency investments as miscellaneous income and collects taxes accordingly. If you earn crypto income above 200,000 JYP, you may be taxed at 55%. For non-residents, they will pay a tax rate of 20% on any income they earn.

Cases that may be subject to tax collection in Japan include:

• Cryptocurrency trading
• DeFi decentralized finance loans
• Mining coins
• Airdrop tokens
• In case of cryptocurrency theft, you may not have to pay taxes.

Above are all the main contents that you must pay attention to about Japan crypto regulation. Hopefully this article can give you useful information so you have the knowledge to invest in the market.