More Updates to Japan's Payment Rules for Virtual Currencies May Be on the Way

A report to be released by NRI argues Japan needs to do more to bring clarity to the innovators working with digital currencies.

AccessTimeIconJul 14, 2016 at 7:03 p.m. UTC
Updated Sep 11, 2021 at 12:22 p.m. UTC

A forthcoming report from Nomura Research Institute (NRI) suggests that more regulations aimed at bitcoin and digital currencies could be forthcoming in Japan.

Penned by senior consultant Yasutake Okano, the report centers on the Payment Services Act (PSA), a bill passed by Japan’s legislature in May. Debated for months, the bill brought domestic bitcoin exchanges under existing anti-money laundering (AML) and know your customer (KYC) rules by classifying virtual currencies as a type of prepaid payment instrument.

But Okano's work notes that the PSA revisions only extend so far. For example, he notes updates to the country’s Banking Act and Financial Instruments and Exchange Act may be needed to clarify how the technology fits under existing law.

The report notes that while the PSA now covers remittances in virtual currencies, this is only for payments up to ¥1m ($9,557), the current limit for prepaid instruments.

The report reads:

"The PSA's ¥1m limit on transactions under its purview is seen as undermining payment services' utility for cross-border transactions."

Okano also suggested updates to the nation’s tax laws related to virtual currencies could be considered, given decisions made by the European Court of Justice.

Okano wrote that while Japan's tax code exempts certain trades in currency, checks and bills, this does not yet apply to bitcoin and other digital currencies.

"There have been a lot of discussions on it," Okano said.

Elsewhere, the report sees the new restrictions as unlikely to serve as a significant obstacle for digital currency exchange businesses, as it suggested any downsides in terms of increased reliability were likely to be balanced by a boost in consumer trust and adoption.

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