A Japanese minister has confirmed that crypto donations are perfectly legal in the country due to a classification loophole. According to a Reuters report, Japanese minister of internal affairs and communication Sanae Takaichi confirmed that new found legality of crypto donations in the county.
The minister specifically commented about their use in elections, stating that crypto donations were not subject to the stringent political funds control laws currently in place. These laws affirm that all donations given to politicians whether in form of fiat, stocks, or bonds must be reported publically. Cryptocurencies incredibly don’t fall into this category due to their current classification, which means that neither the candidate running for office, nor the donor need to report the contribution.
This at first glance looks like a major positive step as far as the crypto industry in japan, but an in-depth look reveals that this is just a legal loophole. When it comes to political funding and campaigns in japan, the rules are very stringent. The political fund’s control act (PFCA) specifically sets out certain criteria for political contributions that the crypto contribution loophole contravenes.
The loophole contravenes The International Institute for Democracy and Electoral Assistance, Article 22-6 of the Political Funds Control Act, 1948 which notes that:
“It is prohibited to make anonymous contribution in connection with elections or other political activities”
The fact that cryptocurrencies are decentralized and not under the control of governments, means that the identity of donors remains anonymous. The clause also spells out the limit that a donor can contribute up to;
“The amount of individual contribution to a person other than political parties and political fund organizations may not exceed 1.5 million yen per year.”
The crypto loophole as well as the use of privacy coins disguises the amounts sent to politicians by donors, which means that the article can also be contravened in that sense. Cryptos are currently taxable in japan, but the rules are contravened here again because you cannot tax what can’t be declared.
In light of all this, Japanese university law professor Tomoaki Iwa has noted that the loophole is a classic case of progress outrunning legislation. According to professor Iwa, “The current law does not keep pace with the times.” It is highly unlikely that this loophole will be left open for much longer though, since Japan is famed for being a pioneer of self-regulation. It does however present a case of policy lagging far behind innovation as Professor Iwa rightly pointed out.