A Japanese politician has proposed four changes to the taxation system he says will promote adoption of cryptocurrency in the country.
There has been a significant increase in the reports of suspected illegal use of cryptocurrencies in Japan.
According to the report, the National Police Agency (NPA) have revealed that there have been 5,944 reports to the Japanese police about suspected illegal uses of cryptocurrencies, such as money laundering, between January and October.
By comparison, the number of such reports last year was 669, but their number increased “after the implementation in April of a law obliging the [cryptocurrency exchange] operators to make reports to the police if they detect dubious digital currency transactions.”
An NPA official declared that such an “increase indicates that the operators have become widely aware of the reporting obligation.”
As Cointelegraph reported recently, the Japanese government is searching for ways to prevent tax evasion on significant profits from cryptocurrency transactions. According to sources familiar to the situation, the government is working on a system that would let the National Tax Agency obtain data from cryptocurrency transaction intermediaries about crypto users.
Earlier this week, Cointelegraph reported that the Japanese Financial Services Agency (FSA) is planning the introduction of stricter Initial Coin Offering (ICO) regulations in an attempt to protect investors from fraud.
R3’s Corda platform aims for an adoption boost via a partnership with Japanese financial services giant SBI Holdings.
Quoting local news outlet Nikkei, the report reveals that SBI, which is involved in multiple cryptocurrency and blockchain-related activities, will expand on its existing investment in R3 to create a “joint venture” aimed at promotion.
“Europe is the most advanced in blockchain product development,” R3 CEO David Rutter told Nikkei in an interview:
“The new joint venture will strengthen the Japanese language service, and promote adoption.”
The company added its R3 partnership would extend beyond Japan to cover the wider Asian space.
R3 focuses on using Distributed Ledger Technologies (DLT), such as blockchain, to facilitate efficiency increases primarily for banking partners. Based in the United States, the startup has clients throughout the world, which currently number around 200.
Deals continue to come, Cointelegraph this week reporting on a group of French banks completing a Corda-based Know Your Customer (KYC) trial, while R3 also announced that the first cryptocurrency added to its payments DApp would be Ripple (XRP).
SBI is also deeply entrenched in XRP, its joint money transfer operation SBI Ripple Asia gaining Japanese regulatory approval in September.
Reported suspicious crypto transactions soared in the first 10 months of 2018, but still comprise a tiny percent of the total.
Recap of the G-20 summit in Argentina.
Members of the Group of 20 (G-20), an international forum for the governments and central banks of countries with developed and developing economies, addressed cryptocurrencies in their recent declaration on sustainable development of the global economy.
Declaration summary: Crypto is important, but it needs to be put under scrutiny and tax regulations
On Dec. 1, the G-20 declaration titled “Building Consensus for Fair and Sustainable Development” was published on the official website of the Council of the European Union and the European Council. The document summarized the 13th gathering of G-20 nations that took place on Nov. 30 and Dec. 1 in Buenos Aires, Argentina.
The declaration addressed crypto regulation, albeit briefly: Cryptocurrencies are mentioned just once there, in the broader context of an “open and resilient financial system” that “is crucial to support sustainable growth.”
While recognizing the importance of the cryptocurrency industry for the global economy, the G-20 also noted that it will introduce Anti-Money Laundering (AML) and anti-terrorist measures per standards of Financial Action Task Force (FATF), an intergovernmental body formed to fight money laundering and terrorist financing:
“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”
Further, in the same segment of the declaration, G-20 participants expressed a positive stance on non-bank financial institutions, pointing out the potential advantages of technology in the financial sector, given that the tech innovators are managing associated risks:
“We look forward to continued progress on achieving resilient non-bank financial intermediation. We will step up efforts to ensure that the potential benefits of technology in the financial sector can be realized while risks are mitigated.”
There is more crypto-related news coming from the international summit, however. On Dec. 2, Japanese news outlet Jiji reported that the G-20 countries have also called for the international taxation of cryptocurrency. According to the publication, the final text of a document cooperatively prepared by G-20 leaders outlines “a taxation system for cross-border electronic payment services.”
The article specifies that — under current laws — foreign companies that do “not have a factory or other base in Japan” cannot be taxed by the local government, while the G-20 leaders seek to “build a taxation system for cross-border electronic services.”
The Japanese news outlet also mentioned an estimated deadline for the system, saying that the final version of regulations, after considering proposals from each member state, is expected to be introduced by 2020. The issue will reportedly be discussed next year, when Japan will become the host of the summit and Japanese Prime Minister Shinzō Abe will take the position of G-20’s president.
Previous G-20 commentary on crypto
G-20 officials have previously maintained a ‘hands-off’ approach on crypto. In March 2018, after a call from France’s finance minister, Bruno Le Maire, the G-20 participants concluded the first public debate on virtual currencies.
The meeting resulted with a “firm” July deadline that had been put forward for “very specific recommendations” on how to regulate cryptocurrencies globally, despite the Financial Stability Board (FSB) — the group which coordinates financial regulation for the G-20 economies — resisting calls from some G-20 members to discuss regulating cryptocurrencies at the conference.
Moreover, many of the G-20 participants decided that cryptocurrencies needed to be examined further before making a concrete regulatory move, albeit some countries including Brazil stated that they won’t be following the G-20 recommendations.
Nevertheless, the G-20 members agreed that the FATF would have its standards applied to the cryptocurrency markets in the respective countries, a position they recently reiterated in Buenos Aires:
“We commit to implement the FATF standards as they apply to crypto-assets, look forward to the FATF review of those standards, and call on the FATF to advance global implementation. We call on international standard-setting bodies (SSBs) to continue their monitoring of crypto-assets and their risks, according to their mandates, and assess multilateral responses as needed.”
In July, a summary of provisional decisions made by the dedicated Finance Ministers & Central Bank Governors said that “technological innovations, including those underlying cryptoassets [sic], can deliver significant benefits to the financial system and the broader economy.” Nevertheless, the document also listed various related problems, including tax evasion and AML concerns:
“Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing.”
Still, the actual recommendations for how to approach the cryptocurrency sphere at the international level were not presented, and the deadline was pushed to October 2018:
“[W]e ask the FATF to clarify in October 2018 how its standards apply to crypto-assets,” the summary read. It is unclear if those recommendations have been presented to date, as there has been no information from the G-20 regarding that issue.
On Oct. 22, as the G-20 remained silent, Jeremy Allaire, the CEO of the Goldman Sachs-backed crypto investment app Circle, stated that crypto-related regulatory matters have to be addressed “at the G20 level.” Prior to that, on Oct. 19, the FATF said that by June 2019, jurisdictions will be obliged to license or regulate cryptocurrency exchanges and some firms providing encrypted wallets internationally as part of AML and anti-terrorism procedures.
More international action
In separate news regarding international adoption and regulation of crypto technology, on Dec. 4, seven southern EU countries — including France, Italy, Spain and Malta — formed an alliance called the “Mediterranean seven” with the aim to promote the use of Distributed Ledger Technology (DLT) among governments, as per Financial Times. The EU, as well as Italy and France, are members of the G-20 alliance.
More specifically, the EU countries have reportedly signed a declaration stating that areas like “education, transport, mobility, shipping, land registry, customs, company registry, and healthcare” can be “transformed” and boosted with the use of DLT.
“This can result not only in the enhancement of e-government services but also increased transparency and reduced administrative burdens, better customs collection and better access to public information,” the declaration reportedly states.
Bitcoin.com CEO’s recent interview with Bloomberg saw ongoing Bitcoin Cash controversy put aside.
In an interview in Tokyo, Ver, who has become known for his slighting of Bitcoin (BTC) in favor of Bitcoin Cash, briefly put the two coins’ differences aside to explain that despite price suppression, there remained a foolproof case for further adoption.
“Long term, the future’s brighter than ever; there’s more awareness, there’s more adoption, there’s more stuff happening all over the world,” he told the network, continuing:
“Of course I’m incredibly bullish on the whole cryptocoin ecosystem.”
Ver was speaking as the fortunes of BTC, his favored BCH strand and recently-formed rival BCH SV continued to shed value.
While BTC has rebounded from annual lows around $3,500 seen last month, BCH shows little sign of achieving the same feat, currently trading at $140 – its lowest ever price since it launched in August 2017.
“I think we need to build an economy [based] on actually using cryptocurrencies as currencies rather than just a bunch of speculators speculating,” he continued:
“…That’s the goal with Bitcoin Cash, both the SV camp and the ABC camp – and I wish every cryptocurrency good luck if they’re trying to bring more economic freedom to the world by making (themselves) useful as currencies for the world.”
In August, BCH developers released Wormhole, a protocol designed to attract projects into using the BCH blockchain to issue their own tokens, instead of using the currently-favored Ethereum (ETH) blockchain.
The Japanese government will establish a system that would track down individuals who refuse to pay tax on profits made from cryptocurrency transactions.
Tax Payments on Cryptocurrency Capital Gains
News coming from a Japanese newspaper, The Mainichi, reports that according to sources, the Japanese government is planning to form a system that would monitor individuals who make profits from cryptocurrency transactions and catch individuals who refuse to pay taxes on gains from such operations.
The new system would empower the National Tax Agency (NTA) to request transactional details from intermediaries such as cryptocurrency exchanges. These exchanges would provide information on customers whom the agency suspects of tax evasion.
Under Japan’s Income Tax Act, gains gotten from cryptocurrency transactions are categorized as miscellaneous income. By this, individuals who gain a minimum profit of 2000,000 yen per annum fall under Income Tax.
Following the present legislation, cryptocurrency exchanges and other virtual currency businesses can release data on clients voluntarily. The Japanese government would also enable the NTA demand information from these businesses, including clients’ names, the address of the customers, and a 12-digit individual identification number.
The government is, however, considering the protection of personal information. The taxation authority would only demand data on customers earning a minimum of 10 million only when it can verify that the individual failed to report half of the income. Digital currency businesses not in favor of these requests can appeal.
A recent NTA survey revealed that over 300 individuals declared earnings of at least 100 million yen from virtual currency transactions in 2017. This profit was due Bitcoin’s record price of $20,000 in 2017.
The outline for the new taxation system would launch in the 2019 fiscal year.
Regulating the Local Cryptocurrency Landscape
Japan is not relenting in its bid to regulate the cryptocurrency industry, improve security, and protect investors. The country which is home to two of the biggest hacks on virtual currency exchanges has tightened regulatory rules for digital currency exchanges in the country.
Reports recently revealed that Japan’s regulatory body, the FSA, had plans to regulate Initial Coin Offerings (ICO). This move by the FSA was to curtail fraudulent ICOs and limit individual’s investment in ICOs to protect them.
EWN also reported that Japan made its registration process stricter for cryptocurrency exchanges who wanted to operate in the country. This move was in response to the Coincheck hack that saw the loss of $538 million worth of XEM and to prevent the future disappearance of customers’ funds.
The FSA also granted self-regulatory status to the Japan Virtual Currency Exchange Association (JVCEA), This body would monitor exchanges in the country and sanction erring businesses.
Image courtesy of Shutterstock.
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The CEO of Japanese fintech firm and crypto exchange operator Quoine believes Bitcoin will “surpass” its all-time price highs by the end of 2019.
The CEO of Japanese fintech firm and crypto exchange operator Quoine has said he believes Bitcoin (BTC) will “surpass” its all-time price highs by the end of 2019, during an interview with Bloomberg Markets: Asia Dec. 4.
Speaking during the aftermath of an industry-wide price slump, Mike Kayamori said he expects new crypto market sentiment and momentum to set in after the new year, noting that “there’s nothing new, no catalyst” in the immediate future to drive prices back up.
The CEO stated that whereas many had called $4,000 as the “technical bottom” for Bitcoin this winter, the top coin had failed to hold the mark during the recent sell-off. “That said,” he added, “when you look at historical [patterns] and where things are going, I think the bottom is near.”
“If there’s enough miners going out of business, that [means] equilibrium is near. When you look at how markets overshoot, both up and down, you can probably say it’s close to the bottom.”
Kayamori claimed that Japanese regulators are now starting to open up again to approve new crypto exchanges and token listings following the the theft of $534 million worth of crypto in January from Japanese exchange Coincheck.
Moreover, the majority of domestic exchanges are coming close to fulfilling the terms of the business improvement orders that were issued by Japan’s Financial Services Agency (FSA) to clean up the industry in the aftermath of the Coincheck hack.
With better practices in place across governance, compliance, asset segregation, secure cold wallet storage — as well as increased participation from financial industry veterans — Japan’s crypto landscape is in a period of “consolidation,” he said.
Noting that Japan was the “first global economic powerhouse” to regulate crypto, Kayamori pointed to the country’s pioneering attention to the industry’s latest fundraising model, the successor to Initial Coin Offerings (ICO): Security Token Offerings, or STOs.
Additionally, the FSA is reportedly working on ICO regulations to protect investors from fraud. And, as reported today, Japan’s government is also purportedly currently seeking ways to prevent tax evasion on profits from crypto transactions.
Japan’s government reportedly wants to allow its tax arm to solicit customer data from crypto intermediaries to tackle tax evasion.
According to sources familiar with the matter, the new system prepared by the government will allow the National Tax Agency (NTA) to get data from transaction intermediaries, such as crypto exchanges. The NTA will be able to solicit information on customers who are suspected of tax evasion, including names, addresses, and 12-digit individual identification numbers.
The sources told the Mainichi Shimbun that the ruling coalition will start elaborating the new taxation system later in 2019, aiming to introduce it by the new fiscal year in April 2020. Due to privacy concerns, the NTA will likely request data only on those users who presumably earned over 10 million yen (approximately $88,700) from crypto transactions.
Under the current legislation, crypto exchanges and other businesses serving as middlemen in the crypto area may provide the data on customers voluntarily, or refuse to do so. In case the above-mentioned legislation is introduced, the intermediaries will still be able to appeal requests to turn over information.
According to a recent NTA survey cited by Mainichi Shimbun, over 300 individuals declared they earned at least 100 million yen from crypto deals in 2017. The paper links it to a drastic market increase in the end of 2017, when Bitcoin (BTC) jumped to a record $20,000.
Earlier in October, a Japanese taxation policy committee held a debate on simplifying the complex tax filing regime currently in place for Japanese citizens. The officials then stated they wanted to to stimulate a more thorough reporting of cryptocurrency gains.
The Financial Services Agency (FSA), the Japanese financial regulator which also oversees the crypto industry, is also reportedly planning to introduce stricter Initial Coin Offering (ICO) regulations to protect investors from fraud. Unnamed sources report that under the new law, ICO business operators will be obliged to seek registration from the FSA.
GMO Coin, a Japanese exchange, is resuming Bitcoin Cash trading employing ABC’s blockchain.
The exchange has reportedly “announced that it will be resuming BCH/JPY trading” tomorrow, Dec. 4. The trading had been “temporarily suspended” in an attempt “to avoid the disruption caused” by the recent Nov. 15 hard fork.
Finance Magnates writes that they “reached out to the company to enquire which of the two versions of Bitcoin Cash” the exchange will be listing. The spokesperson is quoted as answering “in our company, the one shown as BCH indicates a Bitcoin Cash called BCHABC.”
As Cointelegraph recently reported, it has been over a week since the Bitcoin Cash blockchain has split in two. BCHABC, the apparent winning faction, is the more “conservative” network, as Cointelegraph explained, which stands against bringing any radical changes to the BCH software.
In the end, the “battle” ended when Calvin Ayre, a supporter of the “losing” faction (BCH SV), called for a “permanent split” after declaring that BCH SV “no longer want[s] the name Bitcoin Cash.”