Japan to introduce new reporting system to prevent crypto tax evasion

It’s no secret that Japanese authorities are looking to take control over tax money it feels is lost in the crypto space. The country is behind an effort being developed by the G20 to implement a global crypto tax strategy that could see governments receive millions of dollars in payments. Back home in Japan, regulators are now looking to introduce a new system that will report significant profits from crypto-based transactions, helping the country recover even more funds.

According to the Japanese media outlet Mainichi Shimbun, the new system to be implemented will give the National Tax Agency (NTA) the ability to gather data from transaction intermediaries, which include crypto exchanges. The NTA will have the authority to request information – such as names, addresses and personal ID numbers – on customers that it suspects of tax evasion. If everything goes according to plan, the system will be developed next year, with an anticipated implementation for the new fiscal year beginning in April 2020.

Not all individuals would be targeted by the new system. The media outlet quotes several sources who said that only those who earn over 10 million yen ($88,700) through crypto transactions would be held accountable.

Currently, crypto exchanges and other companies that are deemed intermediaries only give up data voluntarily. They have the legal ability to refuse to hand over information, but this could change with the new legislation. The exchanges could be forced to adhere to the requests, but would still maintain the right to appeal any request it feels is unwarranted.

The impact won’t be felt widespread, at least not initially. According to a recent survey conducted by the NTA, only just over 300 people indicated that they earned more than 100 million yen through crypto last year. Given the current market slide, the number has probably dropped significantly.

Japan is also ready to come down hard on initial coin offerings (ICO). The Japanese Financial Services Authority (FSA) announced this week that it would introduce stricter regulations on the offering in order to protect investors from fraud. Going forward, any entity wishing to launch an ICO would have to first register with the FSA.

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G20 nations agree to regulate crypto in line with FATF rules

Members of the G20 international forum have signed a joint declaration that establishes, among other things, the adoption of regulations for cryptocurrencies, in line with standards set forth by the Financial Action Task Force (FATF).

Various media outlets reported that the statement was signed at the conclusion of G20 talks during the weekend, in which concerns such as climate change, sustainable development, gender equality, and movement of refugees were also addressed.

Part of the document read, “An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth… We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”

Related to this, the G20 nations also committed to “continue to work together to seek a consensus based solution to address the impacts of the digitalization of the economy on the international tax system with an update in 2019 and a final report by 2020.”

The FATF consists of 37 member nations. Last October it had set the requiring of its standards to be applied in jurisdictions by June of next year. Under these regulations, cryptocurrency-related entities such as wallet providers, cryptocurrency exchanges, and those holding initial coin offerings (ICOs) will be required to conduct customer due diligence, which includes monitoring and reporting of transactions deemed suspicious.

Countries that fail to meet such standards, as determined by the task force’s periodic reviews, risk being placed in its blacklist.

The G20 includes the European Union (EU) and 19 countries, most of which are represented in the FATF as well, including Argentina, Australia, Japan, the UK, and the U.S.

Reacting to G20’s latest declaration, Bobby Lee, co-founder of the BTCC exchange, tweeted that “national governments are slowly but surely losing their monopoly and ability to issue fiat money.”

In connection with pronouncements and actions by the FATF and G20, individual countries such as Japan and Thailand, as well as individual U.S. states, are already pursuing their own financial reforms taking into account cryptocurrency markets and blockchain technology.

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