Japan’s Regulators Propose to Halt P2P Transfers from Fiat to Crypto
Financial Services Agency (FSA), the Japanese regulator, responsible for creating and implementing legal policies for businesses recently updated its crypto policy. FSA officials are collaborating with the National Police Agency to direct banks to strengthen the user protection checks.
To this end, FSA has brought up various amendments in its legal policies towards the cryptocurrency sector. The main focus of these policies is on customer protection and halting illegal money to crypto exchanges on peer-to-peer trading platforms.
Rise of Fraudulent Crypto Transaction
FSA issued the new rules on 14th February and sent a notification to Japanese banks. As per regulators, the total amount of fraudulent trades has continued to increase. At the same time, regulators claim that the majority portion of these transactions is processed using cryptocurrencies.
FSA and NPA officials have encouraged banking firms to consolidate the security measures. To make this happen, regulators and law enforcement agents have proposed various ideas and solutions.
One such solution suggests banking firms monitor all illegal cryptocurrency transactions that are related to various trading platforms. Another preventive measure is to implement checks on P2P platforms.
The official notification reads that banking firms should seize all transactions with crypto trading services providers in case the name of the sender is different from the name of the account holder.
FSA and NPA Raise Concerns Regarding Crypto Transactions
The FSA and NPA agents have teamed up to crack down against illegal cryptocurrency transactions. Thus, the platform has also published a press release. The document talked about implementing the same crypto transaction restrictions on retail and commercial entities.
The structure of a p2p platform requires the moniker of the user and sender for all types of transactions. This rule is also applicable to crypto to fiat currency exchanges.
However, the crypto-to-fiat transactions are usernames for making both types of transactions different. Therefore, regulators have asked Japanese bank administrators to block transactions that transfer money from one user account and send it to a cryptocurrency wallet. This is a loophole that scammers can use to steal money and lead to compromising the safety and security of bank account holders.
The new regulations may also have bad implications for p2p service providers. FSA has published the policy edit as a recommendation rather than a mandate. In this manner, regulators have granted greater freedom to banks to take the initiative themselves and complete the expected requirements.
It is not possible to predict how the banking firms are going to react to this new proposal and how it will impact the p2p markets.
Japanese Government Implements New Tax Policy
The government of Japan circulated taxation policy reforms for unrealized profits from cryptocurrencies. It is important to note that unrealized gains result from increasing the market value of the asset before cash conversion.
This tax change was introduced in 2023 but it has yet to get approval from the Japanese parliament. On the other end of the spectrum, the GameFi community of Japan has raised concerns surrounding the liquidity drain with legislators.
On this account, the Liberal Democratic Party of Japan has reached out to Japanese legislators in order to address the liquidity crunch in crypto. On 21st February, Oasys director Ryo Matsubara paid a visit to the digital society promotion headquarters of LDP.
Oasys is a GameFi project based on its native blockchain while the purpose of the executive’s visit to LDP was to discuss the liquidity problem.
Matsubara also addressed the recent changes in taxation laws for cryptocurrency service providers. At the same time, he makes note of LPS Act approval to benefit the startups in the industry. Japanese cabinet passed the Limited Partner Act (LPS) this month that allows LPs to add cryptocurrencies as reserves.
However, Matsubara took an issue with the stringent regulations citing concerns about it hindering the growth and progress of the local GameFi sector by way of draining liquidity.
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