Japan's regulators have addressed the cryptocurrency industry since as early as 2017, being the first to introduce a legal definition of "virtual currency" (in the Payment Services Act). The primary financial regulator in Japan, the Financial Services Agency, recognizes and works closely with two self-regulation entities that support fostering the regulatory framework applicable to the crypto industry - the Japan Virtual Currency Exchange Association (JVCEA) and the Japan Security Token Offering Association (JSTOA). VASPs in Japan are expected to consider already how to implement the Travel Rule appropriately. Still, JVCEA's self-regulatory rules regarding the subject are only expected to come into force in April of 2022.
Yes, cryptocurrencies are legal in Japan. The Payment Services Act defines "crypto-assets" as payment methods that are not denominated in fiat currency and can be used to pay unspecified persons. There are no restrictions on owning and investing in cryptocurrencies.
Yes. Exchange Providers in Japan are subject to the anti-money laundering regime outlined in the Act on Prevention of Transfer of Criminal Proceeds. This framework is further specified by the Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism, in force since February 19, 2021.
The Payment Services Act defines Exchange Providers as entities that carry out any of the following crypto-asset exchange services as a business:
In Japan, the Financial Services Agency (FSA) is responsible for supervising crypto asset exchange service providers. However, the FSA recognizes and works closely with two self-regulation entities for the cryptocurrency industry: the Japan Virtual Currency Exchange Association (JVCEA) and the Japan Security Token Offering Association (JSTOA)
The JSTOA focus on token offerings and other crowdfunding events. The JVCEA has a mandate to create rules and policies applicable to cryptocurrency exchanges.
The crypto travel rule will be implemented in Japan through self-regulatory rules enacted by the Japan Virtual Currency Exchange Association (JVCEA) - a self-regulation entity responsible for creating rules and policies applicable to cryptocurrency exchanges in Japan.
Japan's Payment Services Act requires providers of crypto asset exchange services to register with Financial Services Agency. The following acts qualify as crypto asset exchange services:
The crypto travel rule is expected to be mandated in Japan as of April 2022. However, as further explained below, the regulators expect VASPs to consider already how to implement the travel rule appropriately.
On March 31, 2021, the Financial Services Agency addressed a Request for Notification of Originator and Beneficiary Information upon Crypto Assets Transfer ("Request") to the Japan Virtual Currency Exchange Association (JVCEA) - a self-regulation entity responsible for creating rules and policies applicable to cryptocurrency exchanges in Japan. The Request concerns the implementation of the travel rule in Japan.
Most notably, the Request mentions that JVCEA is introducing self-regulatory rules regarding the travel rule by April 2022 and urges:
Notabene's solution is live and can be used by VASPs to comply with local Travel Rule requirements today. Most relevantly, through Notabene, VASPs are able to identify whether the counterparty wallet is custodial or self-hosted and take the measures appropriate to each scenario. Complying with the Travel Rule requires significant changes to VASPs' existing UX and data flows. Bearing this in mind, we allow for a staggered implementation of our solution and promote testnets for VASPs to take their first steps towards compliance in a simulated environment.