Cryptocurrency exchange license in Japan
The Japanese authorities consider cryptocurrency a high-risk currency, so it does not have the properties of fiat funds. Recently, Japan’s legislation has changed regarding financial services. There are new rules regarding the exchange of virtual currency for fiat funds. A company that wants to provide this service must have a Japanese crypto license. This will allow you to enter a new market or open a crypto organization in one of the most promising jurisdictions in the region.
Different countries have various regulations for the crypto industry. Today, Japan is home to many crypto enthusiasts, and many experts believe that this market can be very profitable; as a result, many organizations seek to work in this jurisdiction.Crypto regulations in Japan establish reasonably straightforward rules for controlling this industry – each organization must pass an audit, obtain a work permit and pay taxes. Also, firms must regularly provide data on their activities to regulatory authorities.
The legality of Cryptocurrency Business in Japan
The cryptocurrency business in Japan operates legally.
It must be taken into account that not all cryptocurrencies are considered virtual currency as such in the Law on Financial Services. This law divides virtual currency into the following types:
- a currency that has a monetary value and is allowed to be used to purchase products;
- a currency that can be exchanged for a cryptocurrency that falls under the description above.
Cryptocurrency regulation in Japan
The central Japanese cryptocurrency regulation is the FSA – the Financial Services Authority. This organization controls all transactions and ensures everything is carried out by Japanese law. To register a crypto platform in Japan, the consent of the FSA is required.
Japanese crypto assets are regulated under the Financial Services Act (PSA). The country’s laws regulate the conduct of transactions and the availability of crypto licenses for firms.
And also, crypto services are related to the AML Law to ensure control over the exchange of crypto assets within the boundaries of jurisdiction. The AML law is aimed at countering illegal financial transactions with crypto assets.
No unified legal control applies to all types of cryptocurrencies in Japan simultaneously. The law on transactions is applied to the cryptocurrency used for payment. If tokens have the properties of securities, then the rules of finance apply to them, but at the same time, the type of each security is taken into account.
Suppose a company plans to register in Japan. In that case, it should be noted that, based on the PSA, the provision of services for the exchange of virtual currency is considered commerce:
- purchase and sale of cryptocurrency;
- cryptocurrency exchange;
- brokerage;
- management activities of the clients’ virtual currency.
Since there is an international trend to define cryptocurrency as an asset and not just a means of payment for products, Japanese law has made such an amendment to the definition: now, cryptocurrency is not a virtual currency but a crypto asset.
The registration of an organization as an STO (tokens – securities) in Japan will be controlled by the FIEA. It means that a crypto exchange registered in Japan will not be able to provide STO services if it does not have registration as a securities intermediary.
It follows that a token that cannot be paid as fiat can be exchanged for a cryptocurrency. This type of currency is not considered virtual currency (and this is specified in the Financial Services Law).
Changes in Crypto industry rules
This country began to regulate the crypto industry in 2018. Then the rules were very loyal and straightforward. In 2020, amendments were made to tighten regulations to protect its citizens from fraud, money laundering, and financial terrorism. In 2022, Crypto Travel rules came into force.
How to register a cryptocurrency exchange license in Japan?
To have a license for a crypto exchange in this country, a company wishing to register it needs the following:
- there must be a positive balance for existing assets;
- have an authorized capital of at least 10 million yen;
- conduct its financial activities only within the framework of Japanese law;
- the work of the company must have a management structure;
- personnel must be trained in this area by the requirements of Japan;
- conduct audits and have an accounting database;
- follow the rules of KYC (mandatory verification of the client base) and AML (anti-money laundering).
Cryptocurrency exchange rules
You can exchange crypto assets for other crypto or fiat in any amount. To do this, you can use local or international exchanges that prove an equivalent registration standard in your country, supporting Japan’s progressive approach.
It is worth saying that initially, the rules for regulating cryptocurrencies here were the softest in the entire region; however, after a series of high-profile violations, government agencies decided to tighten regulation. Only organizations that have received a license and meet all the requirements can work here.
Both residents and foreigners can open an organization here, but different rules for getting permits will apply to them. But in order for you to work legally, you need to get a cryptocurrency license in Japan.
How long does the licensing process take in this jurisdiction?
On average, the process of obtaining permits for cryptocurrency in Japan takes from 3 to 6 months. It includes collecting the necessary documents and finalizing your organization to comply with the requirements of government agencies. Then the state authorities have 1-2 months to consider your application and decide.
Basic requirements for crypto organizations
To get permission to work, your organization must meet specific requirements:
- Separation of company’s assets and clients’ assets;
- Carrying out an annual audit;
- Verification of clients;
- Good protection of the personal data of clients;
- Registered capital of more than 1 million Japanese yen (approximately 90 thousand US dollars);
- The director of the organization must be a resident of Japan;
- There must be an anti-money laundering officer on staff;
- The company must have a local office
As you can see, if you are ready to work honestly and openly, you will not have problems with licensing. If you are still determining if your organization meets all the requirements, you can contact the specialists of our company. They will study your organization’s activities and tell you what aspects of work need to be improved so that government agencies do not have questions.
Cost of obtaining a crypto license
The cost of obtaining a work permit depends on many factors, including the authorized capital, the state fee amount, and the lawyers’ services. Our experts will calculate the exact cost of obtaining a crypto exchange licenseand tell you how you can save.
Types of Cryptocurrency Activities in Japan
To date, you must be a licensed company to conduct activities with Japan cryptocurrency. And such a license can be obtained by firms registered as Kabushiki Kaisha, which means a joint-stock company. This type of license can be obtained by an organization that has fulfilled all the requirements imposed by law.
Requirements for a company applying for a license to exchange cryptocurrency in Japan
To obtain a license in Japan, there are two options for organizations:
- if the firm is a resident of Japan. In this case, the company registration will be carried out with a joint-stock company’s organizational and legal form. It is also required to locate the company’s office in this country.
- if the firm is a non-resident of Japan. Then a branch of a foreign company is registered. And in this case, the presence of a physical office in Japan is mandatory – virtual management is not allowed.
To start a licensed crypto business, the authorized capital of the exchange must be at least 10 million yen (about 90 thousand dollars). Obtaining a cryptolicense has its own rules for personnel:
- In the state, employees must be responsible for all company financial transactions. In total, at least 5 employees must be officially employed in the company, which is desirable to find using recruiting agencies.
- At least one Japanese resident director must be appointed.
- The authorized capital must be placed only in one of the banks in Japan.
- Be sure to use the services of a person engaged in professional verification of the company’s activities to control its compliance with Japanese laws.
- It is not allowed to give a company name similar to existing ones, and the name is associated with the Japanese authorities.
The above requirements apply directly to the exchange. Still, some conditions apply directly to persons providing crypto services, namely:
- the assets of the firm and the assets of clients should be separated: the storage of virtual currency, the storage of fiat assets, deposits, and trust funds to be able to identify them;
- perform annual audits;
- use the customer identification procedure;
- comply with laws regarding confidential customer data.
The requirements are relatively easy to fulfill, so there will be no big problems for those who want to engage legally in the crypto business.
A few words about Crypto Travel
This country regularly changes crypto regulations. It recently implemented the Crypto Travel rules, which we want to talk about now in more detail.
Is this rule mandatory in this country?
Since April 2022, this country has joined these rules.
When does the rule come into effect in this country?
The rules were adopted in April and went into effect immediately. However, the regulations provide for a transaction period (from April to October) during which the obligations of the Travel Rules apply to a narrower range of transactions.
Does this country provide a grace period?
During the transition period, the obligations only apply if the intended asset is Bitcoin or Ethereum, the transaction amount exceeds 100,000 Japanese yen, and the beneficiary is a citizen of that country. At the same time, the requirements for user verification came into force only after October.
What is the minimum threshold for such a rule in this country?
During the transition period, the minimum threshold is 100,000 yen, but data on the point after this period has yet to be available.
What data do you need to provide?
Separately, you need to collect data about the customer and the beneficiary of the client:
- Name;
- Wallet address.
It is also necessary to have data on the geographical address or the customer’s identification number. As you can see, you do not need to provide all the data about the people who want to complete transactions.
Why is Notabene right for you?
Notabene’s solution has been launched and can be used today to meet local regulatory requirements. With Notabene, regulators can determine if a counterparty’s wallet is custodial and take action. Compliance with the rules requires significant changes in the user interface and data flows. In light of this, a phased implementation of our solution is allowed.
Taxation of Cryptocurrency Activities in Japan
Considers the types of taxes for crypto activities that are in force in Japanese law:
- The company’s corporate income tax is set at 37.05%, which also includes a tax on residents;
- The amount of income tax for dividends is 15%, for the interest itself – 20%, and fees also 20%;
- The consumer use tax is 8% (like VAT).
Crypto exchanges, in addition to the timely payment of all taxes, need to keep records and conduct audits – annually provide data on all transactions and concluded deals.
Benefits of a Japanese digital asset business license
A crypto currency exchange license has the following benefits:
- if your firm has a crypto license registered in Japan, then you will have a high status among your firm’s clients, as well as an excellent reputation throughout the world;
- Japan belongs to the most significant financial territory of the international standard;
- Japanese jurisdiction is one of the few that provides a crypto license for the exchange of virtual currency
- special agreements are concluded so that the company avoids double taxes;
- this is a country that is not blacklisted in terms of crypto business activities;
- the term for issuing a license is short and takes about 3-4 months.
Services of our company
As you can see, it is challenging to understand the regulation of the crypto industry in this country since the country regularly introduces various amendments. The government is responding to high-profile fraud and seeking to protect its citizens, so it is constantly tightening regulation and reporting requirements. Our specialists follow all the innovations and will provide the most up-to-date information. A detailed consultation takes a lot of time, so we advise you to be free the whole day.
Our lawyers will carefully study your organization’s activities and tell you what changes need to be made so that your company begins to comply with the requirements of government regulators. If you are ready to work honestly and openly, there will be no particular problems.
Also, lawyers will help collect the necessary documents and open a bank account. If you issue a power of attorney for them, they can represent your interests in various institutions.
Specialists will help you find an office and hire local employees with a good reputation. You can trust the experts, and you do not need to fly to this country personally.
Conclusion
This jurisdiction is desirable for starting a crypto business, as many crypto enthusiasts live here, and neighboring countries establish more complex rules for regulating the crypto industry. If you need help independently understanding all the features of the functioning of cryptocurrencies, you can contact our specialists. They will answer all questions related to Japan cryptocurrency regulation and help you get a work permit.
FAQ
Yes, legal for organizations that have received a Japanese crypto license.
Yes, it is necessary; its dimensions are specified in the country’s legislation.
The Financial Services Authority (FSA) regulates Japanese cryptocurrency.