April 28, 2022

Japanese Bankers Association
JBA Comments on ”Crypto-Asset Reporting Framework and Amendments to theCommon Reporting Standard Public consultation document”

We, the Japanese Bankers Association (JBA), appreciate the opportunity to provide
comments on Organisation for Economic Co-operation and Development documents“Crypto-Asset Reporting Framework and Amendments to the Common ReportingStandard Public consultation document” dated March 22, 2022.
We hope that our comments will contribute to further discussions.

Comments on the Consultative Report"Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard Public consultation document"

Questions for public consultation

Applicable Page

Our comments

CARF
Crypto-Assets in scope
1. Does the CARF cover the appropriate scope of CryptoAssets? Do you see a need to either widen orrestrict the scope of Crypto-Assets and, if so, why?

Although the public consultation document implies security token as an example of crypto-assets, we suggest that financial
assets’ digital representations maintained at financial accounts of reporting financial institutions (FIs) under the CRS be
explicitly excluded from the definition of the crypto-assets despite its usage of a cryptographically secured distributed
ledger or a similar technology. There are three reasons behind this suggestion.
First, we consider that the case above does not link to the concerns outlined in the consultation document, which states“…Crypto-Assets, which can be transferred and held without interacting with traditional financial intermediaries and without
any central administrator having full visibility on either the transactions carried out, or the location of Crypto-Assetholdings.” (page3), “are frequently offered by actors that are not covered by the Common Reporting Standard (CRS).
Against this background, the OECD is advancing…” (page3) and “The definition of Crypto-Assets thereby targets thoseassets that can be held and transferred in a decentralised manner, without the intervention of traditional financial
intermediaries” (page5). In other words, financial assets’ digital representations maintained at financial accounts of reportingFIs under CRS are not within the scope of the CARF’s objective.
Second, the CARF and CRS seek to be consistent with the FATF recommendations, whose “Updated Guidance for a RiskBased Approach to Virtual Assets and Virtual Asset Service Providers” defines the relevant assets describing “Virtualassets do not include digital representations of fiat currencies, securities, and other financial assets that are alreadycovered elsewhere in the FATF Recommendations” (item 44) and “That is, they should be applied based on the basic
characteristics of the asset or the service, not the technology it employs.” (item 47) Thus, our suggestion is considered tobe consistent with the FATF recommendations.
Third, in the case where the financial assets we mentioned are classified as crypto-assets, the establishment andimplementation of relevant due diligence procedures will be complicated for both customers and reporting FIs and, thus, will
not be effective and efficient, because reporting FIs will need to deal with the differences between the definitions under theCARF, CRS and FATCA (e.g. Active Entity & Excluded Person in CARF vs Active NFE & Reportable Person in CRS vsActive NFFE and Reportable Person in FATCA, etc.) , including explaining the differences to the customers who trade boththe traditional financial assets and crypto-assets and asking for self-certifications hoping that the customers understoodthe complex definitions.
Therefore, we would like to suggest excluding financial assets’ digital representations maintained at financial accounts ofreporting FIs under the CRS from the definition of crypto-assets despite its usage of a cryptographically secured distributed
ledger or a similar technology, from the viewpoints of the CARF’s objective, consistency with the FATF Recommendations,effectiveness and efficiency.

Reporting requirements
4. Regarding Reportable Retail Payment Transactions,what information would be available to Reporting CryptoAsset Service Providers pursuant to applicable AML
requirements (including the FATF travel rule, which
foresees virtual asset service providers collecting
information on originators and beneficiaries of transfers invirtual assets) with respect to the customers ofmerchants in particular where the customer does not havea relationship with a Reporting Crypto-Asset Service
Provider, for whom it effectuates Reportable RetailPayment Transactions? Are there any specific challenges
associated with collecting and reporting information withrespect to Reportable Retail Payment Transactions? Whatmeasures could be considered to address suchchallenges? Would an exclusion of low-value transactions
via a de minimis threshold help reducing complianceburdens? If so, what would be an appropriate amount andwhat measures could be adopted to avoid circumventionof such threshold by splitting a transaction into different
transactions below the threshold?

In order not to hinder the widely adoption of the use of low-value payment products, a threshold of “Reportable Retail
Payment Transaction ” should be set (e.g. $1,000), for example, following the FATF recommendation,

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Due diligence procedures
4. Section III.D enumerates effective implementation
requirements in instances where a Reporting CryptoAsset Service Provider cannot obtain a self-certificationfrom a Crypto-Asset User or Controlling Person. Notably,
these requirements specify that the Reporting CryptoAsset Service Provider must refuse to effectuate any
Relevant Transactions on behalf of the Crypto-AssetUser until such selfcertification is obtained and its
reasonableness is confirmed. Are there potential
alternative effective mplementation measures to thoselisted in Section III.D? If so, what are the alternative or
additional effective implementation measures and which
persons or Entities would be best-placed to enforce suchmeasures?

There is no problem with adding conditions and deadlines to the performance of transactions by the reporting crypto asset
service provider. In addition, given the view that crypto assets have a higher ML risk than ordinary assets, this provision,
which stipulates that transactions shall be refused unless a legitimate self-certification is submitted (i.e., payment
reservation with a condition precedent), is also appropriate. However, it is considered necessary to fully inform the market of
the withholding of settlement funds, as there is a risk of confusion in the trading market without sufficient explanation inadvance.

Other elements of the proposal
About the whole
1. Comments are also welcomed on all other aspects of
the Crypto-Asset Reporting Framework.

Compared to CRS, due diligence and records/reporting required under CARF are very burdensome. It is expected that a
considerable time will be required for the development of this business procedure and system, and the standards should be
gradually tightened to be equivalent to CRS at first.

Other elements of the proposal【P12】Section III: Due Diligence Procedures
As under CRS, RCASPs should have 24 months to obtain self-certifications for pre-existing accounts as 12 months is not
1. Comments are also welcomed on all other aspects of A. Due Diligence Procedures for Individual Crypto-Asset enough.
the Crypto-Asset Reporting Framework.
Users"When establishing the relationship with the Individual
Crypto-Asset User, or with respect to Preexisting
Individual Crypto-Asset Users by [12 months after theeffective date of the rules], the Reporting Crypto-Asset
Service Provider must obtain a self-certification"(Same for page 30.)Other elements of the proposal【 P28 】 Paragraphs II (D), (E) and (F) – Valuation and The conversion of each transaction into fiat currency should be allowed, not only at the spot rate but also at the averagerate for a given period.
1. Comments are also welcomed on all other aspects of Currency
Valuation and Currency Translation Rules for Crypto-tothe Crypto-Asset Reporting Framework.
fiat transactions
32. For example, the Reporting Crypto-Asset Service
Provider may apply the spot rate(s) as at the time of thetransaction(s) to translate such amounts into a single Fiat
Currency determined by the Reporting Crypto-Asset
Service Provider.
Other elements of the proposal【P40】Subparagraph A(2) – Crypto-Asset
If the definition of a crypto asset includes tokens that are highly individualized (for example, cryptoart or game items), it is
1. Comments are also welcomed on all other aspects of 4 Furthermore, a cryptographic token that represents not clear how to determine fair market value of these items. Highly specific tokens should be excluded.
the Crypto-Asset Reporting Framework.
claims or rights of membership against an individual orEntity, rights to property or other absolute or relative Furthermore, stablecoins linked to legal tender are similar to digital currencies issued by central banks in a sense thatrights (e.g. a security token or a derivative contract or monetary value compared to legal tender will not change and no gain or loss on transfer occurs. Therefore, they should beright to purchase or sell an asset, including a Financial subject to CRS, not CARF.
Asset and a Crypto-Asset, at a set date, price or otherpre-determined factor), and that can be digitally
exchanged for Fiat Currencies or other Crypto-Assets, isa Crypto-Asset. F
Other elements of the proposal【P43】Paragraph IV (B) – Reporting Crypto-Asset Service Reporting Crypto-Asset Service Provider is defined as any individual or Entity that, as a business, provides a service
1. Comments are also welcomed on all other aspects of Provider
effectuating Exchange Transactions for or on behalf of customers, including an entity which makes available a trading
the Crypto-Asset Reporting Framework.
platform. However, a platform provider should not be included in the definition of Reporting Crypto-Asset Service Provider if
it is not part of the transaction.

CRS改訂

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Specified Electronic Money Products
2 What would in your view be the appropriate accountbalance threshold to exclude low-risk e-money products
from the scope of the CRS and why? Are there any
alternative criteria to define low-risk emoney products?

The threshold should be at a level that excludes electronic money used exclusively for cost-of-living payments fromreporting.For example, accounts that do not exceed the $10,000 threshold could be exempted from reportable items andaccounts that are designed not to exceed $10,000 may be exempted from regulation.
Electronic money that cannot be charged from ordinary currency and is acquired only by paying back a certain percentageof the settlement amount should be excluded.

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Collection of TIN for Preexisting Accounts
1 The inclusion of the TIN of Reportable Persons (ifissued by the jurisdiction of residence) significantly
increases the reliability and utility of the CRS information
for tax administrations. Although not included in thecurrent proposal, the OECD is still exploring feasible
measures to ensure the collection and reporting of TINs
with respect to Pre-Existing Accounts. What approaches
could Financial Institutions take to collect TIN informationin respect of Pre-Existing Accounts, while mitigating
potential burdens for Reporting Financial Institutions?

・ Financial institutions are already making sufficient efforts to obtain information from existing accounts. Therefore, it isimportant for governments to inform customers of the need to respond to requests for information from financial institutions.

Other comments【P63】
Adding information as to whether account holders provide valid self-certification to the reporting items would have a
2. Comments are also welcomed on all other aspects of Section I: General Reporting Requirements
significant impact on banking operations. Therefore, the Commentary should clearly state the significance and purpose ofamendments to the CRS.
1. a) the name, address, jurisdiction(s) of residence, TIN(s) adding such information to the reporting items.
and date and place of birth (in the case of an individual) of Does this addition intend that, regardless of Preexisting or New Accounts, applying "due diligence procedures for Preexistingeach Reportable Person that is an Account Holder of the Accounts" to account holders with no valid self-certification is just only a temporary measure, which shall be updated byaccount and whether the Account Holder has provided a valid self-certification?
valid self-certification; b) in the case of any Entity that is If you have any other reasons for this addition, be sure to clarify them. If there is no clear and reasonable reason in thisan Account Holder and that, after application of the due regard, this additional requirement shall be deleted from proposals.
diligence procedures consistent with Sections V, VI andVII, is identified as having one or more Controlling Persons
that is a Reportable Person, the name, address,
jurisdiction(s) of residence and TIN(s) of the Entity andthe name, address, jurisdiction(s) of residence, TIN(s) anddate, and place of birth of each Reportable Person, as wellas the role(s) by virtue of which each Reportable Person
is a Controlling Person of the Entity and whether a valid
self-certification has been provided for each Reportable
Person; andOther comments【P63】
The addition of reporting items has a significant impact on banking practices.Therefore, the Commentary should clearly state
2. Comments are also welcomed on all other aspects of Section I: General Reporting Requirements
the significance and purpose of adding such information to the reporting items.
amendments to the CRS.
A. 2. […] whether the account is a Preexisting Account or Does this addition intend to pay careful attention to the New Account holders with no valid self-certification as it is highlya New Accountlikely that Reporting Financial institutions fail to obtain TIN from them in this situation?
If you have any other reasons for this addition, be sure to clarify them. If there is no clear and reasonable reason in thisregard, this additional requirement shall be deleted from proposals.
Other comments【P88】
The criteria for listed companies that are exempt from reporting are too detailed, Such criteria should be more practicable
2. Comments are also welcomed on all other aspects of For the purposes of the Standard, “ each share class of and identifiable in light of KYC of financial institutions.
amendments to the CRS.
the stock of the corporation” means one or more classesof the stock of the corporation that (i) were listed on oneor more established securities markets during the priorcalendar year and (ii), in aggregate, represent more than
50% of (a) the total combined voting power of all class ofstock of such corporation entitled to vote and (b) the total
value of the stock of such corporation.