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Investigating Digital Assets in Japan Stymied by Nature of Crypto

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According to top government officials in Japan, the current national tax system is not yet capable of accepting declarations of digital assets, potentially leading to outflows overseas.

In a Q&A session at the Financial Statements Committee on April 6, Representative Shun Otokita of the Japan Innovation Party pointed out the importance of market research for the introduction of separate taxes for crypto currencies.

Otokita was concerned with the current high-tax system in Japan. He acknowledged that it would be difficult to quickly change the tax code to apply to digital assets, and indicated the necessity of market research to determine what changes are necessary. 

Recent changes to crypto regulations in Japan

In Japan, individuals can not be identified only by the blockchain address of a transaction, whether it’s for a non-taxable gift or a taxable payment for services. Japanese Minister of Finance Taro Aso said that the lack of oversight for these transactions was a major reason their investigation was moving at a crawl.

As there are no official laws to regulate crypto in Japan, amending existing regulations is the only way at this time for digital assets to have any kind of legal status in the Asian nation. The Payment Services Act and Financial Instruments and Exchange Act will start to be enforced in Japan by the Financial Services Agency (FSA) on May 1. 

However, when it comes to taxes, the FSA has not investigated any transactions other than those conducted by registered cryptocurrency exchanges. Aso has called for the committee to investigate “the taxation of transactions involving crypto assets,” while Otokita pointed out the Japan Cryptocurrency Business Association (JCBA) was conducting an investigation of its own into the matter.





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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.