In a very unique declaring by a governing authority, Japanese Financial Services Agency has said that all forms of stable coins do not fall in the category of cryptocurrencies.
Stable coins are blockchain based tokens that have their value pegged to a certain fiat. The most famous examples are Tether (USDT), Gemini Dollar (GUSD). The value does not variate like that of other cryptocurrencies. This is solved by holding equivalent reserves of fiat in a bank.
PrePaid Payment Instrument
In the ruling, JSA has said that stable coins have characteristics of prepaid payment instruments, such as gift cards or prepaid debit cards.
In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act”, stated JSA in clarification, “Generally speaking, companies need to register as the ‘Issuer of Prepaid Payment Instruments’ or the ‘Funds Transfer Service Providers’ based on Payment Services Act, when virtual currency broker dealers trade stable coins”. Therefore, stable coin issuers in Japan do not have to register with the FSA as a crypto company. Unless of course they are engaging in crypto activity besides stable coins, which is likely.
With JSA declaring stable coins as prepaid payment instruments, this creates new obstacles for parties intending to use the tokens. The law states that for transactions over JPY 1 million (USD 9,000), a banking license is required. This means that any medium or large entity would require a license to transact the tokens.
Japan is a very welcoming country when it comes to blockchain adoption and cryptocurrencies in particular. However, the national financial regulator has made very distinct rules about digital assets and the stable coin declaration is just another part of their classification of cryptocurrencies.
16 of the major crypto exchanges in the island country are self-regulated and watched closely by the JSA.
The latest ruling, although a first of its kind, clearly shows that Japan is serious about distinction of cryptocurrencies and the further classification of stable coins is just another step.
The JSA ruling comes nearly a day after tech giant Fujitsu said it has teamed with 9 banks for a settlement systemon blockchain and it will be interesting to see how it all connects in the future