NRI Report: Japan's New Payment Rules Hold Back Bitcoin Remittances

A forthcoming report from Nomura Research Institute (NRI) argues that despite new regulations aimed at bitcoin and digital currencies, more needs to be done to bring clarity to the innovators working with the technology in Japan.

Penned by senior consultant Yasutake Okano, the report centers on the Payment Services Act (PSA), a bill passed by Japan’s legislature in May. Debated for months, the bill brought domestic bitcoin exchanges under existing anti-money laundering (AML) and know your customer (KYC) rules by classifying virtual currencies as a type of prepaid payment instrument.

But Okano argues the PSA revisions don't go far enough, and that further updates to the country’s Banking Act and Financial Instruments and Exchange Act will be needed to clarify whether other promising use cases for the technology can be explored.

For example, the report notes that while the PSA now covers remittances in virtual currencies, this is only for payments up to ¥1m ($9,557), the current limit for prepaid instruments.

The report reads:

"The PSA's ¥1m limit on transactions under its purview is seen as undermining payment services' utility for cross-border transactions."

Okano also suggested that more clarity is needed on how the nation’s tax laws should treat virtual currencies, a move he said would bring Japan’s regulation in line with decisions made by the European Court of Justice.

He wrote that while Japan's tax code exempts certain trades in currency, checks and bills, this does not yet apply to bitcoin and other digital currencies.

"There have been a lot of discussions on it," Okano said.

Elsewhere, the report found that the new restrictions are likely to serve as a "barrier to entry" for digital currency exchange businesses, though it suggested any downsides to this were likely to be balanced by a boost in consumer trust and adoption.