Crypto Regulations in Japan 2024

Japanese are known to be rooted in traditions, however, they are welcoming when it comes to technological advancements. They play a very important role in cryptography. They were the first ones to recognize the potential of a digital decentralized world and begin mining Bitcoin. Japan has emerged as the crypto hub of the world. Cryptocurrency is not considered as a legal tender in Japan as it is not issued by the central bank.

In this module, Coinpedia has compiled the latest crypto regulations in Japan in 2024.

Introduction

The Japanese Financial Services Agency (FSA) is responsible for regulating cryptocurrency in Japan. With the help of Japan Virtual Currency Exchange Association (JVCEA) and Japan Security Token Offering Association (JSTOA), Japan regulates cryptocurrency. In April 2017, the Payment Services Act (PSA) recognized Bitcoin as legitimate property. The whole regulatory timeline has been very active since then. 

Let us explore the regulatory framework in Japan when it comes to cryptocurrencies.

Is cryptocurrency Regulated in Japan?

The cryptocurrencies have been recognized as legal property under the Payment Services Act (PSA). 

• The most significant action came into picture in May, 2020. The amendments to PSA and Financial Instruments Exchange Act (FIEA) were introduced.  The term “virtual currency” was replaced by “crypto-asset”.
• The crypto exchanges functioning in Japan have to register with the FSA and follow traditional AML/ CFT responsibilities. It ensures that crypto exchanges here operate in a secure manner.
• The National Tax Agency of Japan has termed earnings on cryptocurrencies as “miscellaneous income” since 2017. Thus, making sure that the crypto players are taxed accordingly.
• AML standards are taken care of by the Act of Prevention of Transfer of Criminal Proceeds enforced by Japan’s financial intelligence unit, JAFIC.
• The virtual Asset service providers are required to undertake KYC strictly.
• The companies with highly qualified Financial Bureau are eligible to operate as a crypto exchange here.
• Japan allows international crypto exchanges to work if they have registered themselves as per the law in their home country.

TimeLine of Crypto Regulations

2024

Feb, 16 2024 : Japan’s cabinet approved a bill permitting investment funds and venture capital firms to acquire crypto assets, fostering innovation and economic growth.

Feb 14,2024: The Financial Services Agency and National Police Agency urged banks to enhance user protection against unlawful transfers to crypto exchanges.

2023

Dec 25,2023: The Japanese cabinet approved ending taxation of unrealized cryptocurrency gains, expected to boost the Web3 industry

Sept 01 2023: Japan’s Financial Services Agency (FSA) took the initiative to propose changes to the tax code for digital assets, assuming greater control over crypto regulation.

August 30, 2023: EOS token received whitelist approval from the Japan Virtual and Crypto Asset Exchange Association, allowing trading against the Japanese yen on regulated exchanges in Japan.

Aug 1 2023:  Binance has officially launched in Japan as Binance Japan K.K.  

July 28, 2023: Advocates in Japan, including the Japan Blockchain Association, requested a tax regime revision to ease the burden on crypto holders.

Jun 26 2023: Financial Services Authority (FSA) of Japan partnered with the Monetary Authority of Singapore (MAS) to jointly regulate and pilot test cryptocurrency projects under Singapore’s “Project Guardian” initiative.

Jun 25, 2023: Japan’s National Tax Agency updated corporate tax guidelines, exempting token issuers from unrealized crypto gains tax.

May 24, 2023: Japan lawmakers mandated stricter Anti-Money Laundering (AML) measures for tracing crypto transactions starting June 1.

May 13 2023: The G7 members met in Japan, discussing CBDCs and urged the rapid implementation of the “Travel Rule” for crypto assets.

April 6, 2023: Japan’s Web3 project team published a white paper to boost the crypto industry.

Feb 1, 2023: Japanese Prime Minister Fumio Kishida expressed support for blockchain, including DAOs and NFTs, to address technological challenges.

18 jan 2023: Coinbase announced the termination of operations in Japan due to market conditions.

Taxation on cryptocurrency

• The Japan National Tax Association views crypto as property and taxes it.
• Japan considers crypto earning over 200k JPY to be miscellaneous income.
• They can be taxed at rates up to 55%.
• It includes permanent residents’ profits from trading, mining, and DeFi lending.
• Tax on stock profits is 20%, a bit higher comparatively!
• For instance, if one buys or sells crypto in the last financial year and made more than 2,00,000 JPY, he needs to declare the crypto totals on Income Tax returns.
• The tax paid on crypto gains depends on the Personal Income Tax bracket a person is in.
• Investors could pay a maximum 55% tax on crypto under income tax.

Conclusion

The government of Japan was seen giving NFTs as rewards for good work for local authorities. Such activities by the government shows its friendliness towards the crypto world. With some relaxations and progressive regulations, Japan is considered as one of the apt countries for dealing with cryptocurrencies.