Japanese financial regulator does not consider stablecoins as cryptocurrencies

• FSA says stablecoins are not covered by the Payment Services Act.
• Stablecoins providers need to register as prepaid payment instruments issuers or  as fund transfer providers.

The Japanese Financial Services Authority does to classify stable coins as virtual currencies regulated by the effective legislation, rules, and regulations applicable to crypto industry, Bitcoin.com reports.
The bill for virtual currencies, approved in April 2017, covers digital assets that are used as a medium of exchange and exempted from consumption tax. Meanwhile, stablecoins are not regulated like other digital money:

"In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act," FSA explains.

While cryptocurrency exchanges and trading platforms should register with the regulator and obtain a license, companies do not necessarily need to obtain a permit before issuing stablecoins
However, it does not mean that stablecoin providers operate in a regulatory vacuum. They have to register either as an issuer of prepaid payment instruments or fund transfer providers to be able to trade stablecoins.

Fund transfer providers may perform transactions up to 1M yen without a banking license, according to the Bank of Japan. Larger transactions can be performed only by banks. 

"When a person/an entity engages in exchange transactions of one million yen equivalent or less in the course of trade, registration as a funds transfer service provider is required. For exchange transactions exceeding one million yen, a license for banking business pursuant to the ‘Banking Act’ is required," FSA added.