Japan's Financial Regulator: Stablecoins Are Not Cryptocurrencies, Have to Be Regulated Individually

  • Japan's financial regulator, the Financial Services Agency (FSA), has said that stablecoins do not meet the criteria to be considered cryptocurrencies.
  • Japan's self-regulatory body, the Virtual Currency Exchange Association (JVCEA), is not authorized to regulate stablecoins.

Japan’s financial regulator, the Financial Services Agency (FSA), recently announced that it does not consider stablecoins to be cryptocurrencies. This, according to the nation’s current regulatory framework.

At present, there are two specific regulatory requirements, or laws, that crypto firms operating in Japan must follow. They include the nation’s Payment Services Act and the Fund Settlement Law.

Under Japan’s Fund Settlement Law, cryptocurrencies are considered a method of payment, or medium of exchange, and their users need not pay taxes. The Payment Services Act requires that local digital asset exchanges register with the FSA.

Stablecoins Are Not "Virtual Currencies"

According to the Payment Service Act, stablecoins do not meet the criteria, or fit the definition, of “virtual currencies.” An FSA representative told Bitcoin News: “In principle, stablecoins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act.”

Moreover, the FSA has found that all the different stablecoins in circulation have varying characteristics, and because of this, there is no uniform criteria that can be used to categorize them. This also means there’s no standard, or common rule that can be applied when determining how they should be legally registered.

The FSA spokesperson noted:

Due to [varying] characteristics [of stablecoins], it is not necessarily appropriate to suggest what those companies need to obtain or register before issuing stable coins.

Japan's Financial Service Agency

As CryptoGlobe reported on October 24th, Japan’s Virtual Currency Exchange Association (JVCEA) is now authorized by the FSA to operate as a self-regulatory body - which means that it can create regulatory guidelines for local crypto exchanges to follow, and also enforce penalties in cases of non-compliance.

The JVCEA Cannot Regulate Stablecoins

However, given that the FSA has now stated that stablecoins are not cryptocurrencies, the JVCEA will not be able to regulate them. Presumably, the nation’s financial regulator will now have to determine how to regulate each stablecoin individually.

As CryptoGlobe covered, one of the biggest problems facing digital currencies is that they are extremely volatile. Although the bitcoin (BTC) volatility index is at its lowest since December of 2016, and the prices of other major cryptos have also experienced relatively less volatility, many institutional investors might still be waiting on the sidelines as they may still view digital currencies as highly risky investments.

With the launch of many new stablecoins, would-be investors now have a way to enter the crypto market without having to experience the adverse effects of high volatility (to a certain extent).

Binance ‘Unknowingly’ Earns $775K via Staking, Set to Launch Huge XLM Giveaway

On Thursday (July 18), Binance, the world's largest cryptoasset exchange (by adjusted trading volume), made a rather interesting announcement: it had "unknowingly" earned 9.5 million Stellar Lumen (XLM) tokens through staking rewards, and it is going to give all of it away to all Binance users who maintain XLM balances between July 20 and September 1.

Binance explained via a blog post that in August 2018 the Binance team followed the advice of the Stellar Development Foundation "to change some parameters on both cold and hot wallets," which resulted in the exchange "unknowingly" earning staking rewards for its XLM holdings since 31 August 2018.

Then, this week, while the Binance team was considering the idea of adding support for XLM staking, it found out that Binance had earned around 9.5 million XLM tokens (each of which was worth approximately $0.08157 at the time). Binance notes that all "weekly staking rewards between then and now are documented on the blockchain." 

So, the team made two decisions:

  • add support for XLM staking to Binance.com; and
  • give away the aforementioned staking rewards to the Binance community (i.e. Binance users).

This is not the first time that Binance has added staking support to Binance.com. The exchange already "distributes NeoGas for NEO holders, Ontology Gas for Ontology holders, VTHO for VeChain holders, and BitTorrent tokens for TRON tokens."

Here is how this 9.5 million XLM giveaway is going to happen.

From July 20, Binance will support XLM staking. Between this date and September 1, Binance will take "daily snapshots" of XLM balances in Binance user accounts.

Then, on September 1, Binance will "tally average user XLM balances based on these snapshots," and process the distribution of staking rewards to these user accounts (that maintained XLM balances during the staking period). Furthermore, the roughly 9.5 million XLM tokens that Binance has unknowingly earned to date will be distributed as a bonus payment to all Binance users who jave maintained non-zero XLM balances since July 20. 

Binance says in its blog post that it estimates this "one-time distribution of 9,500,000 XLM shared proportionately among Binance users" to be worth "10 to 12 months of typical monthly rewards."

According to a support article published on July 18, here are the details of Binance's "Monthly XLM Staking Airdrop Program":

  • Binance will start these daily XLM balance snapshots at 00:00 (UTC) on 20 July 2019.
  • This is how Binance will calculate the XLM staking distribution:

XLM generated by each user = Total XLM staking rewards received by Binance * User XLM holdings ratio. User XLM holdings ratio = User XLM holdings / Total XLM staked by Binance.

  •  In order to qualify for XLM staking rewards, Binance users must have a balance of at least 10 XLM.
  • This initial distribution of XLM staking rewards will be calculated until 1 September 2019, "with the total amount distributed equal to the staking rewards accrued on holdings during the 43 day period."
  • These XLM staking rewards are calculated on a daily basis and are distributed monthly. 
  • XLM distrubutions will be "completed before the 5th of each month."

In other Binance news, another support article explained that Binance's Margin Trading platform has added support for two margin assets (EOS and LINK), three borrowable assets (BNB, EOS, and LINK), and three margin pairs (EOS/USDT, EOS/BTC, LINK/USDT, LINKBTC).

Binance's announcement about its 9.5 million XLM giveaway may have helped the XLM price. According to CryptoCompare, XLM is currently trading at $0.08914, up 7.96% in the past 24-hour period:

XLM-USD 24-Hour Chart on 18 July 2019.png

Featured Image Courtesy of Binance