Japan’s Financial Service Agency (FSA), the country’s top securities watchdog has confirmed that it views Ripple’s native token XRP as a cryptocurrency and not as a security, contrary to the stance of the United States Securities and Exchange Commission (SEC).
In an email to The Block, the Japanese regulator said, “FSA regards XRP as a cryptocurrency based on definitions of the Payment Services Act. FSA refrains from making comments about other authorities’ response.”
This statement represents the first time Japan’s securities regulator has commented directly on the status of XRP in terms of being a security or digital asset.
A couple of weeks ago, Nomura Research Institute published a report, saying that according to the Act, a widely accepted interpretation is that XRP is a digital asset and not a security.
Following the report from Nomura Research Institute, Ripple’s major partner SBI Holdings published a press release that describes XRP as a digital asset. However, SBI did not directly cite comments from the FSA.
Cryptocurrency Definitions In Line With Payment Services Act of Japan
According to the Payment Services Act of Japan, a digital asset is a cryptocurrency or virtual currency when it’s used as a payment method to an unspecified person and when it’s not dominated in fiat currency. Obviously, XRP has all the attributes mentioned in the definition.
Speaking to The Block, the FCA said “The term ‘Virtual Currency’ as used in this Act means any of the following:
“(i) property value (limited to that which is recorded on an electronic device or any other object by electronic means, and excluding the Japanese currency, foreign currencies, and Currency-Denominated Assets; the same applies in the following item) which can be used in relation to unspecified persons for the purpose of paying consideration for the purchase or leasing of goods or the receipt of provision of services and can also be purchased from and sold to unspecified persons acting as counterparties, and which can be transferred by means of an electronic data processing system;
and (ii) property value which can be mutually exchanged with what is set forth in the preceding item with unspecified persons acting as counterparties, and which can be transferred by means of an electronic data processing system.”
According to the Act, cryptocurrency-denominated assets are assets that are denominated in Japanese yen or any other foreign currency.
It can also be recalled that the United Kingdom’s financial ministry considers XRP as an exchange token, rather than viewing it as a security such as its United States counterpart.
In a regulatory consultation document published a couple of days ago, the U.K. financial ministry clarified that “Tokens that are primarily used as a means of exchange – this includes widely known cryptoassets such as Bitcoin, Ether and XRP.”
In conclusion, this clarification is not expected to influence the ongoing lawsuit between SEC and Ripple, but is a reflection of how governments around the world would take different viewpoints in regulating crypto-assets such as XRP.