TOKYO -- Japan plans to clarify rules for cross-border cryptocurrency transfers following recent hiccups with the technology, making it easier for businesses to comply with existing law and paving the way for a new era of cross-border payments.
The Ministry of Finance will take steps to ensure cryptocurrency transactions equivalent to more than 30 million yen ($282,450) are reported to officials if they involve foreign businesses or individuals, as is required by law. Tightening up this regulatory scheme would help address issues such as money laundering by making cross-border transactions in these highly anonymous assets easier to track. Clear rules will also give cryptocurrency payments a sturdy framework on which to grow.
Japan's foreign exchange law mandates that all cross-border payments worth over 30 million yen be reported to the Finance Ministry. Changes to Japan's payments law last year defined virtual currency as a method of payment, bringing it under the scope of this filing requirement. But the lack of a standard measure for cryptocurrencies' value has raised concerns about compliance.
As soon as June, the ministry looks to define such a standard based on exchanges' rates for the relevant cryptocoin on the day of the transaction. If the cash value of the cryptocurrency sent is more than 30 million yen by that measure, the transaction must be reported. For example, given that 1 bitcoin was worth around 800,000 yen on exchanges Wednesday, a payment of 40 bitcoin would meet the reporting requirement.
When less well-known coins without a yen-based reference market are in play, their value will be assessed based on what they are worth in better-known cryptocurrencies such as bitcoin.
The Finance Ministry says it began receiving filings on virtual currency payments even before cryptocoins were legally defined as a payment method. Since the first reports arrived in mid-2016, the ministry has seen over 1,000 such filings, representing transactions worth over 30 billion yen.
Transfers between cryptocurrency exchange operators in Japan and abroad are thought to routinely exceed the mandatory reporting threshold. But only a small fraction of operators likely file as required. These businesses have been found to be wanting on the security front as well: Lax data safety measures led to the theft of roughly 58 billion yen of the virtual currency NEM from the Coincheck exchange in January.
Yet the market for virtual currencies continues to grow, and the number of businesses and individuals using these assets to make international payments is expected to rise in kind. While exchange operators are working with information technology and securities companies to get their systems into shape and find new avenues for growth, the Finance Ministry looks to prevent these businesses "from unknowingly violating the foreign exchange law," a representative said. Clear rules will help on both of these fronts.