Popular social messaging platform Line issued payment tokens for an online game, but that decision may backfire on the company very soon. Japanese regulators feel Line broke rules, which means the company is subject to a financial sanction.
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Payment Token Line Crossed
Most people know Line as the social messaging app, which has become incredibly popular all over Asia over the last few years. But the company has been experimenting with other services as well, including issuing their own payment token that can be used for an online game.
This business decision seemed to make a lot of sense, as Japanese consumers are very keen on online games and applications which use prepaid tokens to boost player progression over time. However, these tokens are a cause of concern for regulators in Japan, as they are trying to come up with a new regulatory framework, which would apply to all types of “other” currencies, including Bitcoin.
Unfortunately for Line, the company is now facing a lot of scrutiny by financial regulators, and the Line offices have been raided in April 2016 as part of a “routine investigation.” Handling customers’ money used to buy payment tokens has attracted a lot of attention, as this type of business activity is frowned upon, albeit there is no law that is preventing companies from doing so.
That being said, Line did make one critical mistake, as they did not park funds from the token since they do not consider it a currency. Moreover, this decision means all of the money generated through this token has not been reported to regulators, which is considered a crime. This is not good news for the subsidiary of Naver Corp. by any means.
Japanese law is a bit different than most countries when it comes to prepaid tokens. Funds raised from such initiatives – assuming the token is used as a currency – has to be reported to the authorities. Additionally, companies are obligated to park half of customers’ unused deposits of over 10 million yen with a division of the Justice Ministry, which Line did not do.
Due to this failure to notify authorities about the financial gain made from their in-game tokens, they have been found guilty of breaching Japan’s fund settlement law. This decision was rendered by the Kanto Local Finance Bureau, and the company will have to pay the deposit shortfall to the authorities.
From the information we have received, Line will be paying the owed funds without problems, although the amount could be a lot higher than most people may anticipate. Mainichi, a Japanese newspaper, mentioned how the company has a shortfall of roughly 12.5 billion yen — or $114m USD — in unpaid deposits although official sources have not confirmed these numbers.
Whether or not this news will have an effect on the pending regulatory changes regarding Bitcoin and virtual currencies, remains to be seen. It is a positive sign Line will pay the money without fighting the decision, though, as this sends a signal to regulators the company is willing to comply. Now that Japan is warming to Bitcoin and other virtual currencies, treading carefully is of the utmost importance.
What are your thoughts on Line and their in-game tokens? Will it affect Bitcoin regulation in Japan? Let us know in the comments below!
Source: The Fiscal Times
Images courtesy of Line, Shutterstock