While the world may be demanding more and more stablecoin and considering them as bridge between virtual currencies and fiat currencies, Japanese regulator, the Financial Services Agency has emphasized that they are not virtual currencies and also clarified their registration requirement.
Characteristics of Stablecoin different from Virtual Currencies says FSA
According to a report published on Bitcoin.com, The Financial Services Agency said that that’s characteristics of Stablecoins are different from that of Virtual currencies and hence they do not fall under the legal purview of cryptocurrencies.
With the rise of cryptocurrencies, Japan had amended its Fund Settlement Law and Payment Services Act so that it could regulate the country’s crypto industry. These amended laws went into effect in April last year. The Fund settlement Law defines “virtual currencies,” which include cryptocurrencies, as a means of payment and exempts them from consumption tax while the Payment Services Act requires cryptocurrency exchange operators to register with the Financial Services Agency (FSA).
Understanding the global rise in popularity of fiat-pegged cryptocurrencies, commonly referred to as stablecoins, The FSA made a clarification stating
“In principle, stablecoins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.”
The regulator further added
“Generally speaking, companies need to register as the ‘Issuer of Prepaid Payment Instruments’ or the ‘Funds Transfer Service Providers’ based on Payment Services Act, when virtual currency broker-dealers trade stablecoins.”
Why it becomes critical to understand is because in Japan, there are two types of prepaid payment instruments: those for one’s own business and those for third-party businesses, according to the FSA. Each has its own reporting and registration requirements. Those registered as fund transfer service providers may perform fund transfer transactions of up to one million yen [$9,000]” without a banking license. “In other words, fund transfer transactions of over one million yen are still handled exclusively by banks,”
The statements and clarifications from the regulator also stand important because a couple of weeks back Japanese internet giant GMO announced that it “will start full-scale preparations to issue stablecoins of virtual currency.”
While Japan had shown flexibility by amending its laws to accommodate cryptocurrencies, its looks slightly difficult for it to make amendments again so that stablecoin can be accommodated. This makes it difficult for stablecoins to flourish in Japan alongside cryptocurrencies. One will have to see now the new self-regulatory status given to cryptocurrencies help in this situation.
Will Japan amend it laws again to accommodate to accommodate stablecoins? Do let us know your views on the same
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Divya Bhatia from Computer science background is a full-time content writer at Coingape. Her passion lies in writing and delivering apt information to users. Currently, she does not hold any form of cryptocurrencies. Reach out to her at [email protected]