Japan’s financial watchdog has declared that stablecoins such as Tether, Gemini Dollar and USD Coin, are not classified as cryptocurrencies under its existing crypto regulations.
The number of stablecoins has burgeoned this year – their generic name is derived from the fact that a stablecoin’s value is pegged to a fiat currency and backed by cash held in reserve at a bank.
Clarifying its decision, Japan’s Financial Services Agency (FSA) stated that “in principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.”
Adding that “therefore, stablecoin 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 stablecoins, which is likely.”
Currently, all crypto companies operating in Japan must meet the requirements set out by two pieces of crypto regulation called the Payment Services Act and the Fund Settlement Law.
The Fund Settlement Law classifies cryptocurrencies as a method of payment, or medium of exchange, and therefore their users need not pay taxes. The Payment Services Act requires crypto exchanges to register with the FSA.
The announcement has created confusion over which regulations will apply to stablecoin transactions and it looks likely that the FSA will have to approach the regulation of stablecoins on an individual basis until a clearer regulatory framework can be devised.