[NEWS] Financial Services Agency to work on system to make it easier for businesses to handle in-game crypto assets

The Financial Services Agency (FSA) Announces Initiation of Discussions to Create a Framework for Game Developers to Easily Handle Cryptocurrencies, Nikkei Reports

The discussions will begin in the working group of the Financial System Council as part of the amendments to the Payment Services Act, starting on the 25th. The content of the discussions is expected to involve regulatory easing, such as reducing the burden of securing funds for repayment, which may enable the use of cryptocurrencies within games to purchase items, similar to overseas practices.

Under current law, companies need to obtain a license as a cryptocurrency exchange operator to enable cryptocurrency purchases within their own services.

The regulatory barriers to entry are high, including asset management and securing repayment funds, and without change, Japan is likely to fall behind in the adoption of cryptocurrency compared to overseas.

In the expert panel, there is also a proposal to establish a new brokerage service that would mediate between users and existing cryptocurrency exchange operators, but involving a third party could place additional burdens on users.

Regarding the handling of cryptocurrencies by businesses, the Liberal Democratic Party's Digital Society Promotion Headquarters also mentioned this in a request submitted in April, and there has been a longstanding demand for regulatory easing within the industry.

Taira Masaaki, the chairman of the Liberal Democratic Party’s Web3.0 PT, has also expressed concern in his speeches, stating that if cryptocurrency regulations are not eased, promising Web3.0 talent will flow overseas. However, he also noted that changing legal regulations would require the involvement of many government employees across different ministries, making it a long-term endeavor with significant challenges.

In the working group of the expert panel, they will also discuss mechanisms to legally ensure the return of domestic users’ assets if a foreign cryptocurrency exchange company goes bankrupt.

Additionally, the FSA is expected to consider adding a "domestic asset holding order" provision to the administrative penalties under the Payment Services Act. For example, in the case of the bankrupt major cryptocurrency exchange FTX, the Japanese entity was registered under the Financial Instruments and Exchange Act, which allowed the order to be issued, but it would have been difficult if they were only registered under the Payment Services Act.

Easing of Stablecoin Regulations Also Under Consideration

Financial regulations can sometimes reduce convenience for users or make financial institutions harder to use.

Although a system was created in 2023 to allow the issuance of stablecoins, which are linked to the value of legal tender, the current issuance remains sluggish.

This is because businesses are required to prepare cash reserves equivalent to the issuance amount, placing a certain burden on them. In contrast, overseas, assets such as government bonds can be used as collateral, generating interest income, which is a key difference from Japan.

To address this, the FSA is considering regulatory easing that would allow short-term government bonds, in addition to cash reserves. In the U.S. state of New York and the U.K., for instance, the use of government bonds and other safe assets for this purpose is already allowed. The FSA also plans to review other regulations that reduce convenience and simultaneously consider necessary regulatory easing.

Reference: Nikkei
Image: Shutterstock

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