Japan has been at the forefront of cryptocurrency regulation since April 1, 2017, when the amended Payment Services Act came into effect. Under this law, operators of virtual currency exchange businesses must register with the Japanese Financial Services Agency (FSA).
Understanding Virtual Currency Under the Payment Services Act
Not all cryptocurrencies qualify as "virtual currencies" under the Payment Services Act. The law defines two types:
- Currency with Financial Value: Can be used to pay for goods/services (e.g., Bitcoin, Litecoin, Ethereum).
- Exchangeable Currency: Can be traded with currencies falling under the first category.
Exclusions:
- Coins/tokens not meeting the above definitions.
- Fiat-pegged instruments (stablecoins are excluded unless compliant).
Applicants must submit:
- A list and description of virtual currencies their company plans to trade.
Activities Not Considered Virtual Currency Exchange Businesses
Examples include:
- Individuals/entities trading cryptocurrencies solely for personal investment.
- Cryptocurrency mining firms.
- Software developers.
- Wallet service providers not involved in buying/selling virtual currencies.
Advantages of a Japanese FSA Virtual Currency License
👉 Why Japan’s crypto license stands out globally
- Strong Reputation: Enhances credibility for businesses and clients.
- Global Recognition: One of the few jurisdictions offering regulated crypto exchange licenses.
- Financial Hub: Access to Japan’s robust financial infrastructure.
- Tax Benefits: 96 double-taxation avoidance treaties.
- Compliance: Not blacklisted; adheres to international standards.
Step-by-Step Application Process
1. Company Registration
- Reserve a company name.
- Submit incorporation documents to the registry (8 weeks).
2. Regulatory Filings
- Report to the Bank of Japan under the Foreign Exchange Act.
- Notify tax authorities.
3. Bank Account & FSA Registration
- Open a corporate bank account.
- Register with the FSA/local finance bureau (6 months for license approval).
Required Documentation
For Directors/Shareholders:
- Notarized passport copies.
- Certified proof of address (utility bill).
- Bank reference letters.
- Two professional references per person.
- Signed resumes and notarized education diplomas.
- Clean criminal record.
For Corporate Shareholders:
- Certified certificate of incorporation.
- Shareholder list.
- Latest financial statements.
- Good standing certificate.
For the Business:
- Detailed business plan (3-year financial projections).
Manuals:
- Internal controls/procedures.
- User protection measures.
- Virtual currency segregation policies.
- IT risk management.
- List/description of virtual currencies offered.
- Draft contracts for exchange operations.
Additional Due Diligence:
- Proof of fund sources.
- Translated/notarized documents if not in English.
FAQs
1. How long does the FSA license take to process?
- Approximately 6 months after company incorporation (8 weeks).
2. Can stablecoins be traded under this license?
- No, unless they meet Japan’s Payment Services Act definition.
3. Is face-to-face verification required?
- If unavailable, registered mail to the ID address is acceptable.
4. Are mining operations eligible for this license?
- No, mining falls outside the FSA’s exchange regulations.
5. What happens if documents are incomplete?
- The FSA/local banks may request additional proof, delaying approval.
👉 Explore crypto-friendly jurisdictions
Final Note:
The FSA’s strict approval process (fewer than 20 licenses issued) makes this license highly exclusive. Alternatives like the U.S. MSB or Canadian MSB offer cost-effective solutions for broader market access.
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