Japan Enhances Crypto Oversight: P2P Transactions and Tax Exemptions in Focus

In a move to strengthen regulations around cryptocurrency transactions, Japan's Financial Services Agency (FSA) has proposed measures that could potentially disrupt the peer-to-peer (P2P) market. The FSA has asked banks to enhance monitoring of transfers to crypto exchanges and consider rejecting transfers where the sender's name does not match the account name.

These recommendations, aimed at both individual and corporate accounts, serve as a recommendation rather than a mandatory rule. However, they have the potential to disrupt the P2P market, as the nature of such transactions often involves different names on the fiat and crypto ends.

Meanwhile, Japan is also considering a tax exemption for crypto businesses to foster innovation in the blockchain and crypto space. The proposed exemption, which starts June 20, would allow crypto businesses to be exempt from 30% tax on unrealized gains. However, crypto investors still face up to 55% income tax on earnings over 200,000 yen. The bill requires parliamentary approval.

In addition, the FSA has proposed an amendment to clarify DAO definitions. The amendment aims to equate a "Limited Company Type DAO Employee Rights Token" with LLC member rights, easing regulations for tokenized LLCs and simplifying DAO operations.

The proposed measures come as Japan seeks to balance oversight with fostering innovation in the crypto space. How banks respond and the impact on the P2P market remain to be seen.