Japan’s financial regulator, the Financial Services Agency (FSA), recently announced that it does not consider stablecoins to be cryptocurrencies. This, according to the nation’s current regulatory framework. At present, there are two specific regulatory requirements, or laws, that crypto firms operating in Japan must follow. They include the nation’s Payment Services Act and the Fund Settlement Law. Under Japan’s Fund Settlement Law, cryptocurrencies are considered a method of payment, or medium of exchange, and their users need not pay taxes. The Payment Services Act requires that local digital asset exchanges register with the FSA.
Stablecoins Are Not "Virtual Currencies"
According to the Payment Service Act, stablecoins do not meet the criteria, or fit the definition, of “virtual currencies.” An FSA representative told Bitcoin News: “In principle, stablecoins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.” Moreover, the FSA has found that all the different stablecoins in circulation have varying characteristics, and because of this, there is no uniform criteria that can be used to categorize them. This also means there’s no standard, or common rule that can be applied when determining how they should be legally registered. The FSA spokesperson noted:
Due to [varying] characteristics [of stablecoins], it is not necessarily appropriate to suggest what those companies need to obtain or register before issuing stable coins. Japan's Financial Service Agency
As CryptoGlobe reported on October 24th, Japan’s Virtual Currency Exchange Association (JVCEA) is now authorized by the FSA to operate as a self-regulatory body - which means that it can create regulatory guidelines for local crypto exchanges to follow, and also enforce penalties in cases of non-compliance.
The JVCEA Cannot Regulate Stablecoins
However, given that the FSA has now stated that stablecoins are not cryptocurrencies, the JVCEA will not be able to regulate them. Presumably, the nation’s financial regulator will now have to determine how to regulate each stablecoin individually. As CryptoGlobe covered, one of the biggest problems facing digital currencies is that they are extremely volatile. Although the bitcoin (BTC) volatility index is at its lowest since December of 2016, and the prices of other major cryptos have also experienced relatively less volatility, many institutional investors might still be waiting on the sidelines as they may still view digital currencies as highly risky investments. With the launch of many new stablecoins, would-be investors now have a way to enter the crypto market without having to experience the adverse effects of high volatility (to a certain extent).