The Financial Action Task Force (FATF) amended FATF Recommendations in October 2018. As a result of the amendments, crypto assets exchangers, custodians of crypto assets, etc. will be required to implement anti-money laundering and countering the financing of terrorism controls. Amendments to the Payment Service Act were made on 1 May 2020, which takes into account such FATF recommendations.
The main elements of the amendments to the Payment Service Act are as follows.
Characterizing cryptocurrencies as “crypto assets” rather than “virtual currencies” in light of the fact that most crypto assets are not used as currencies, and restricting advertisements for “speculative investments” in the cryptocurrency space
Provisions concerning the in-advance notification, etc., have been prescribed, which pertain to applications for registration of a crypto asset exchanger, the name of the crypto assets to be handled by crypto asset exchangers, and changes to the business of the crypto asset exchangers.
Provisions concerning the service of crypto assets exchangers have been prescribed, such as the method for displaying advertisements of crypto assets exchangers, prohibited activities, provision of information to users and other measures for ensuring user protection, and methods for managing users’ monetary and crypto assets.
Provisions concerning the transaction of Financial Instruments Service Operators, etc., which engage in derivative transactions using crypto assets and fund-raising transactions in the course of trade, have been prescribed. These include the development of business management systems, methods for displaying advertisements, provision of information to customers, prohibited acts, and methods for managing rights to transfer electronic records of customers, etc., for Financial Instruments Service Operators.
While the amendments to the Payment Service Act are not directly related to tax, it is hoped that new tax regulations will also be implemented with respect to cryptocurrency. For example, currently, individuals are taxed at regular individual tax rates on gains arising from the sale of crypto assets; if more favorable rates were implemented, this may encourage further development in the area and promote Japan as a digital asset “hub” in Asia.