East Asian cryptocurrency regulation: Japan

Compared with China’s full-scale attack on virtual currencies, the neighboring country, Japan, has implemented the newly revised “Fund Settlement Algorithm” on April 1, 2017 to officially recognize the legal status of virtual currencies. As China’s supervision of virtual currencies has become more and more important The tightening, coupled with the geographical proximity, has caused a large number of Chinese investors to flood into Japan. Chinese investors poured into Japan.

1. Supervision Overview 

Japan’s regulation of virtual currencies is mainly stipulated in the “Fund Settlement Algorithm” (2009 Law No. 59), which was revised and re-promulgated on June 3, 2016 and officially implemented on April 1, 2017 because The newly revised bill specifically adds provisions on virtual currency, so the “Fund Settlement Algorithm” is generally also referred to as the “Virtual Currency Law.” At the same time, the Financial Services Agency of Japan has also issued a number of guiding opinions or interpretations to guide the application of relevant laws.

2. Legal Regulations

The Japanese Virtual Currency Law stipulates the definition of virtual currency and the obligations of virtual currency practitioners, including: 

1. Virtual currency

Virtual currency refers to:

(1) When purchasing or borrowing goods, or receiving services, the value of property that can be used by unspecified persons to pay for the consideration, and the property value that can be purchased or sold by unspecified persons for the other party (only limited to electronic The method is recorded in electronic equipment, excluding domestic currency, foreign currency, and assets expressed in currency), and can be transferred through an electronic information processing system;

(2) The property value listed in (1) above can be exchanged with an unspecified person as the other party, and can be transferred through the electronic information processing system.

In summary, virtual currency is a property value with the following characteristics:

(1) It can be paid to an unspecified person as the price, and can be exchanged with legal tender;

(2) Electronic records can be transferred;

(3) Assets expressed in non-statutory currency or legal currency.

2. Virtual currency practitioners 

Virtual currency practitioners refer to institutions that have registered in accordance with Article 63, paragraph 2 of the “Fund Settlement Algorithm”. According to this clause of the “Fund Settlement Algorithm”, those who have not accepted the registration of the Prime Minister and the Minister of the Cabinet shall not be allowed to engage in virtual currency exchange business. The registration system is also applicable to virtual currency exchange companies established in foreign countries (outside Japan).

According to the “Fund Settlement Algorithm”, virtual currency practitioners must comply with the following obligations:

1. Information security management obligations. Virtual currency practitioners must take necessary measures to prevent the leakage, loss or damage of information related to the virtual currency transaction business.

2. Provide information to investors. Virtual currency practitioners must take necessary measures to prevent confusion between the virtual currency they operate and their national currency or foreign currency to explain, provide information on handling fees and other contract content related to virtual currency transactions, and protect investors.

3. Investor’s property management obligations. Virtual currency practitioners must manage investor funds or virtual currency separately from their own funds or virtual currency, and accept audits by certified accountants.

4. Sign contract obligations with designated virtual currency exchange business dispute resolution institutions. Virtual currency practitioners must sign a contract with a designated virtual currency exchange business dispute resolution agency and publish it, or formulate complaints and dispute resolution measures.

5. Obligation to submit business reports. Virtual currency practitioners must submit to the Prime Minister of the Cabinet: Annual business report; a report (with supporting materials) on the amount of funds managed by investors, the number of virtual currencies and their management status prepared during the specified period.

6. Filing obligations. When a part or all of the business operations are suspended or transferred, or when a company merges, splits, dissolves, or becomes bankrupt, the announcement must be made at the same time that it must be filed with the Prime Minister.

 3. Tax regulations 

On December 1, 2017, the National Tax Agency of Japan issued “On the calculation method of virtual currency income, etc.”, stating that the sales or use of virtual currency represented by Bitcoin is in principle classified as miscellaneous income and requires income tax. declare. This document enumerates the specific calculation methods for the profit and loss of virtual currency in different transactions or usage situations. However, according to Article 48, paragraph 2 of the “Enforcement Decree of the Consumer Law” (Administrative Decree No. 360 of 1988, revised on March 31, 2017 and implemented on July 1 of the same year), the transfer of virtual currency is not subject to consumption tax. In other words, the 8% consumption tax will no longer be levied on Bitcoin exchange in Japan.

 4. Industry Regulations 

Article 87 of Japan’s “Fund Settlement Algorithm” stipulates that virtual currency can establish an industry self-regulatory management association. In terms of virtual currency industry self-regulation, Japan has two associations, namely the Japan Virtual Currency Business Association (JCBA) and the Japan Blockchain Association. (JBA).

5. Introduction of major Japanese exchanges


Bitflyer was established in January 2014 and is currently Japan’s largest virtual currency exchange


Zaif was established in June 2014 and originally only provided bitcoin wallet services. After acquiring the bitcoin exchange etwings in the form of mergers and acquisitions in 2014, it began to provide exchange services in March 2015. In addition to the affairs of exchanges, zaif is also engaged in projects such as the development of private blockchain mijin.

3. Quoinex:

Quoinex was established in May 2014, the former exchange name was Quoine, and it was renamed Quoinex in March 2017. The headquarters was originally established in Singapore, and in June 2016, the head office was transferred to Japan.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/east-asian-cryptocurrency-regulation-japan/
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