Japanese Authority Poised to Revise Regulations on Cryptocurrency Gaming

The leading financial regulator in Japan, the Financial Services Agency (FSA), has reportedly indicated its readiness to amend the country’s regulations concerning crypto gaming.

According to Japanese media sources Nikkei and CoinPost, the FSA is also preparing to “discuss the establishment of a framework” that would “facilitate businesses” in “managing cryptoassets.”

Nikkei mentioned that a working group within the Financial System Council will focus on “updating” the current Payment Services Act.

Japanese Regulator: Prepared for Changes?

The proposed reforms could potentially simplify the process for companies to “manage” in-game cryptoassets.

This could, in turn, “motivate more significant domestic enterprises” to venture into the blockchain gaming industry.

The Japanese flag flies outside the headquarters of the Financial Services Agency in Tokyo, Japan. (Source: ANN News/YouTube)

Similar to neighboring South Korea, Japan is home to numerous large gaming companies. However, many of these firms have adopted a cautious approach towards blockchain gaming.

This is largely attributed to the stringent regulations imposed by Tokyo (and Seoul) on three critical sectors: cryptocurrency and exchanges, video gaming, and gambling.

Nonetheless, Tokyo has been seeking to amend its crypto-related legislation following industry pressure.

Opposition parties have accused the ruling Liberal Democratic Party (LDP) of driving Japanese web3 startups abroad.

The government has already taken steps to ease tax regulations for firms holding cryptocurrencies and is anticipated to implement tax reforms for individual crypto traders.

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— Reuters (@Reuters) September 25, 2024

International Examples

Nikkei is known for having reliable contacts within the FSA. The publication reported that the reforms may “simplify” the process for players to “acquire items in games using cryptoassets, similar to practices abroad.”

At present, Japanese companies that utilize tradable in-game currencies or cryptoassets must demonstrate they possess sufficient funds to reimburse users in case of a hack or other emergencies.

This requirement has been deemed “onerous” for Japanese gaming companies. However, the FSA seems receptive to the possibility of altering or eliminating this stipulation.

Asset management, another complex issue for gaming firms interested in crypto, is also slated for examination.

The media outlet reported that the regulator initiated discussions during a working group meeting of the council on September 25.

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— Bloomberg (@business) September 24, 2024

Tax System ‘Not Suitable for Web3′

The council serves as the FSA’s primary advisory entity. It is responsible for investigating regulatory challenges and developing financial policies related to regulations.

CoinPost highlighted that Masaaki Taira, the chairman of the LDP’s web3 policy unit, recently remarked that Japan’s tax framework is “not tailored” for startups “in the contemporary landscape.”

“When [Japanese] startup companies hold and issue tokens that are not as [well-known] as Bitcoin, accounting firms cannot perform adequate audits. This continues to be an issue.”

Masaaki Taira, LDP lawmaker

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