Japan Blockchain Association Proposes Cryptocurrency Tax Reforms to Government

The Japan Blockchain Association (JBA), led by Representative Director Yuji Kano of bitFlyer, submitted a proposal for cryptocurrency tax reforms to the government on July 28, 2023. The JBA is advocating for a review of the current tax system, which they argue is hindering the growth of Web3 businesses in Japan. They are calling for a more conducive environment for citizens to hold and use cryptocurrencies.

The specific requests in the proposal are as follows:

1. Abolish the year-end unrealized gain tax on tokens issued by third parties.

In June 2023, Japan’s National Tax Agency revised some corporate tax rules, allowing companies to exempt market value evaluations of cryptocurrencies they issued themselves. However, the year-end unrealized gain tax on tokens issued by third parties continues to be a barrier for domestic companies entering new Web3 businesses. The JBA believes that abolishing this tax would significantly reduce barriers to entry into Web3 businesses and prevent token price drops caused by companies selling tokens to pay taxes.

2. Change the taxation method for individual cryptocurrency transactions to separate declaration taxation and set a uniform tax rate of 20%.

According to the latest statistics from the Japan Virtual Currency Exchange Association (JVCEA), the number of cryptocurrency trading accounts in Japan continues to increase. As of April 2023, about 6.8 million accounts have been opened, surpassing the number of accounts (about 3.61 million) when the tax system for foreign exchange margin trading (FX) changed from comprehensive taxation to separate declaration taxation in June 2011. The JBA’s survey results showed that 43.9% of respondents would like to double their investment if the tax system changes to separate declaration taxation.

3. Abolish income tax on profits each time cryptocurrencies are exchanged.

The JBA expects that this will make operations more suitable for Web3 use cases such as DeFi and NFT markets, leading to an improvement in the convenience of cryptocurrencies.

The JBA hopes that by realizing these tax reform requests, Japan will be recognized as a leading Web3 country both domestically and internationally. They believe that the expansion of the new industry, the Web3 economy, will greatly contribute to the growth of the Japanese economy, which is facing transformation.

They also suggest that the increase in cryptocurrency users, investment amounts, profit realization, and proper declarations could contribute to tax revenue, limiting the impact on tax revenue reduction, and in some cases, could even increase tax revenue.

Image source: Shutterstock


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Crypto Exchange bitFlyer Implements Travel Rule for Crypto Asset Transfers

BitFlyer, a leading Japanese crypto asset exchange operator, announced the implementation of new regulations known as the travel rule, aimed at preventing criminal activities and enhancing security in the crypto industry. The company made this announcement on March 23, 2023, in line with updates to the Act on Prevention of Transfer of Criminal Proceeds and other relevant regulations.

Effective from Tuesday, May 30, 2023, around 15:00 JST, bitFlyer will begin implementing the travel rule for all corporate and individual customers who send and receive crypto assets through their services. The company will use the Travel Rule Universal Solution Technology (TRUST) to facilitate compliance with these regulations.

Currently, bitFlyer supports the travel rule solution for several crypto assets, including Bitcoin (BTC), Ethereum (ETH), and ERC-20 tokens such as BAT, LINK, MATIC, MKR, SHIB, and PLT. However, as of May 30, 2023, only the sending and receiving of BTC will be possible between bitFlyer and Coincheck. The availability of sending and receiving ETH and ERC-20 tokens will depend on the completion of Coincheck’s development.

Under the new regulations, customers can send crypto assets to exchange operators that can send and receive the legally required information notifications through TRUST. In Japan, the designated exchange operator is Coincheck, while outside Japan, customers can refer to the list of TRUST-compatible players provided on the Coinbase website. Additionally, customers can also send crypto assets to private wallets like MetaMask, which are not managed by exchange operators.

However, it should be noted that sending crypto assets to exchange operators registered with authorities in Japan or other legally designated countries and regions that cannot send and receive the legally required information notifications through TRUST is not supported.

BitFlyer emphasizes the importance of receiving crypto assets in compliance with the travel rule. Upon receiving crypto assets on their platform, bitFlyer will verify the notification information and may contact customers via email if clarification or additional information is required. Customers are advised to allocate sufficient time for the confirmation process and respond promptly to any communication from bitFlyer.

BitFlyer also mentions its commitment to improving customer convenience and may expand the travel rule solutions based on the practices of other crypto asset exchange operators. This implies that the methods for handling supported crypto asset transfers may be subject to change in the future.

The travel rule, a requirement put forth by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing, mandates that exchange operators providing crypto asset transfers must provide specific information about the sender and recipient to the receiving exchange operator.

BitFlyer, as a crypto asset exchange operator and a type-1 financial instruments business, is dedicated to the development of the crypto asset and web3 industries. The company aims to provide a secure environment for customers to trade crypto assets and contribute to the further advancement of the crypto industry.

Customers are encouraged to refer to the provided references and resources for additional information about the travel rule, including the Japan Virtual and Crypto Assets Exchange Association (JVCEA) and the Financial Services Agency (FSA).


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bitFlyer Co-Founder Seeks to Reinstate as CEO

Yuzo Kano, co-founder of bitFlyer, a prominent cryptocurrency exchange in Japan, plans to reintroduce himself as CEO in an attempt to reinvigorate the company. Kano left the company in 2019 amidst a series of management disputes, but he aims to lead the company towards an Initial Public Offering (IPO) in the coming months, according to a report by Bloomberg. He also hopes to put Japan back on the map in the world of cryptocurrency by making bitFlyer capable of competing on the international stage.

Kano intends to introduce stablecoins to the trading platform, build a token-issuance operation, and open-source bitFlyer’s “miyabi” blockchain to the public if he is reinstated. He believes that the company has become stagnant in his absence, with no new products or services launched, which he aims to change. He claims that bitFlyer is “a company that produces nothing new.”

Regulatory pressures imposed by Japan’s Financial Services Agency in 2018 led to management issues at bitFlyer, with the need to adopt more stringent money laundering policies. Despite this, bitFlyer remains one of the larger cryptocurrency exchanges in Japan, with over 2.5 million accounts. The departure of international competitors such as Kraken and Coinbase has left bitFlyer with a stronger position in the Japanese market.

Kano retained a 40% stake in the company despite stepping down as CEO, and he believes that he can help bitFlyer reclaim its former status as an innovative and dynamic company. He plans to introduce new products and services, including stablecoins and token-issuance operations, and he hopes to take the company public in the near future.

If Kano is reinstated as CEO, his plans for bitFlyer could help to solidify the company’s position in the Japanese and international cryptocurrency markets. By introducing stablecoins and other innovations, he could attract new users and investors to the platform. Additionally, opening up bitFlyer’s blockchain to the public could foster collaboration and innovation in the broader cryptocurrency community.

In summary, Yuzo Kano, co-founder of bitFlyer, aims to return as CEO in an attempt to revitalize the company and lead it towards an IPO. He plans to introduce new products and services, including stablecoins and token-issuance operations, and he hopes to make bitFlyer capable of competing on the international stage. By doing so, he believes that he can put Japan back on the map in the world of cryptocurrency.


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ACA Group Has Decided to Abandon its Acquisition of BitFlyer Holdings

ACA Group, a leading financial advisor for institutions across the world has officially announced to the public that it is no longer interested in purchasing holdings of a Japanese-based cryptocurrency exchange, BitFlyer.


The ACA Group which is based in both Singapore and Japan announced the news on Saturday through Nikkei.com. 

ACA Group had earlier in  April agreed to purchase majority stake holdings of BitFlyer valued at up to $370 million (45 billion Yen). 

The intention of ACA Group was to sell off the BitFlyer holdings after it has increased in corporate value. A coalition of shareholders independently negotiated the ACA agreement with the support of Minefumi Komiyama, the founder of bitFlyer, who owns about 13% of the company.

Not much information was given by ACA Group on their decision to back out from their initial agreement but the decision comes after a number of proposed collaboration has come to halt recently including Galaxy Digital, which terminated its planned acquisition of crypto manager BitGo in August.

All About BitFlyer

BitFlyer is a private company in Tokyo, Japan. The company is involved in buying, selling, and trading bitcoin and other cryptocurrencies with more than 2.5 million users across its platform. BitFlyer was launched against the backdrop of Bitcoin’s permanent market cap of $14,000.

The Tokyo-based crypto exchange BitFlyer recorded a loss of about $6.9 million in profit for the company’s financial year ending in 2019. The loss in profit was a result of a drop in the value of Bitcoin (BTC) in the second half of 2019. 

The Financial Service Agency also discovered a security mishap in BitFlyer’s business processes which eventually expose its customers’ investments to cyber theft in 2018. 

BitFlyer responded to the issue by promising to stop receiving new businesses after regulators said they were not putting the needed efforts and structures to curb money laundering and the finance of terrorism.

The future is still bright for BitFlyer as it has continually shown resilience in the face of adversity over the years. The firm hopes that investors use their previous success to judge them while considering future investments with them.

Image source: Shutterstock


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Bitcoin extends slide below $43K as Binance’s BTC stash grows to May-crash levels

Despite Bitcoin (BTC)  dropping below $43,000 mark on Sept. 20, the outflow of BTC from exchanges has continued in a multi-month trend, particularly on Coinbase Pro. 

BTC/USD 4-hour candle chart, Coinbase. Source: TradingView.com

Over the past month, the amount of Bitcoin held in Coinbase Pro’s vaults dropped by 28,843.87 BTC. Similarly, other crypto exchanges, including Kraken, OKEx, Bitfinex, and Huobi, also experienced a drop in their Bitcoin holdings, with the withdrawn amount totaling 30,236 BTC across the board.

Bitcoin balance on Coinbase Pro. Source: ByBt.com

On-chain analysts perceive falling Bitcoin reserves as a bullish signal.

That is primarily because most traders move their BTC assets to exchanges only when they prefer to trade them for other assets—be it fiat currencies or altcoins. As a result, the exchange balance serves as a metric to gauge traders’ sentiments for the underlying asset.

As a result, Coinbase Pro’s declining Bitcoin reserves hint at its traders’ intention to hold BTC instead of selling it. But, at the same time, its top rival Binance has been playing a spoilsport. 

Binance BTC reserves buck the trend

However, data also shows that the Bitcoin balance in Binance wallets has risen to 29,717 BTC in the last 30 days, which is more the amount Coinbase Pro withdrew from its vaults.

Bitcoin balance on Binance. Source: ByBt.com

As the world’s leading crypto exchange by volume, Binance enjoys a certain influence on the market due to its global outreach. The exchange’s rising Bitcoin balances suggest that its users could sell an increasing amount of BTC, the opposite of the trend seen on Coinbase.

The increase in Bitcoin reserves on Binance also reached levels that followed up with the market sell-offs during the second quarter of 2021. Notably, the Bitcoin balance on the exchange spiked from 199.7K BTC on April 20 to 347.59K BTC on June 26.

Bitcoin balance on Binance between April 20 and June 26. Source: ByBt.com

The same period saw BTC/USD drop from around $65,000 to below $30,000, including the notorious May 19 crash when Bitcoin plunged by more than 30%.

Bitcoin trading at $300 premium on Binance

The massive spike in Bitcoin reserves on Binance also coincided with premium BTC/USD bids on the exchange with the BTC spot price being almost $400 higher on Binance than on Coinbase.

Bitcoin prices on Binance versus Coinbase. Source: TradingView.com

The vast price difference created arbitrage trading opportunities, coinciding with Binance’s Bitcoin reserves adding 1,529 BTC in the previous 24 hours compared to Coinbase that processed withdrawals of 579 BTC.

Related: Does Evergrande’s $300B debt crisis pose systemic risk to the crypto industry?

As a reminder, exchanges still processed more than 30,000 BTC in withdrawals in the past 30 days, signaling that traders overall wanted to hold their crypto rather than sell it for other assets.

But given Binance’s trading volumes (~$24 billion) in the previous 24 hours were six times higher than Coinbase Pro (~$4.23 billion) at press time—as per data collected from CoinMarketCap—the probability of an interim Bitcoin price drop appeared high.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.