Cryptocurrencies: Legal, treated as property
Cryptocurrency exchanges: Legal, must register with the Financial Services Agency
Japan has the world’s most progressive regulatory climate for cryptocurrencies and, as of April 2017, recognizes Bitcoin and other digital currencies as legal property under the Payment Services Act. Japan is the world’s biggest market for Bitcoin and, in December 2017, the National Tax Agency ruled that gains on cryptocurrencies should be categorized as ‘miscellaneous income’ and investors taxed at rates of 15%-55%.
Cryptocurrency exchange regulations in Japan are similarly progressive. Exchanges are legal in Japan, but after a series of high profile hacks, including the notorious Coincheck heist of $530 million in digital currency, crypto regulations have become an urgent national concern. Japan’s Financial Services Agency (FSA) has stepped up efforts to regulate trading and exchanges: amendments to the Payment Services Act now require cryptocurrency exchanges to be registered with the FSA in order to operate – a process which can take up to six months, and which imposes stricter requirements around both cybersecurity and AML/CFT.
Japan remains a friendly environment for cryptocurrencies, but growing AML concerns are drawing the FSA’s attention to further regulatory steps. Following talks between exchanges and the FSA, an agreement to form a self-regulatory body – the Japanese Virtual Currency Exchange Association (JVCEA) – was put in place. The JVCEA will provide advice to as-yet unlicensed exchanges and promote regulatory compliance.