Japan changes the term “virtual currency” to “crypto asset,” obtaining Cabinet approval for the proposed revision

On March 15, the Japanese government made a Cabinet decision on the proposed revision to the Financial Instruments and Exchange Act and Payment Services Act, which included changing the term “virtual currency” to “crypto asset.”

 

In the draft report of the 11th meeting of the Study Group on the Virtual Currency Exchange Services issued on December 14, 2018, the FSA disclosed a plan to change the term “virtual currency,” including Bitcoin (BTC), to “crypto asset.”

 

The word “Virtual currency” has been used by the Financial Action Task Force (FATF) and overseas laws and regulations. The term has been used widely in Japan, too. The amended Payment Services Act, which has been in effect in Japan since April 2017 and contains the definition of virtual currency, also uses the term “virtual currency.” Meanwhile, the term “crypto asset” has become increasingly popular at international forums, including the Group of Twenty (G20) summit, creating changes in how the term is used. In addition, because the term “currency” could cause confusion with legal currencies, such as Japanese yen and US dollars, the FSA’s draft report stated a plan to follow international standards and change the term to “crypto asset.”

 

According to media reports, the proposed revision is said to require virtual currency exchanges to secure a source of funds to repay virtual currencies to customers in preparation for illegal outflows. In addition, the FSA is expected to make Initial Coin Offerings (ICO; financing using virtual currencies) subject to regulation by the Financial Instruments and Exchange Act and introduce a registration system for ICO operators, in order to strengthen information disclosure and sales control frameworks for investors.