Virtual currency purchased after solicitation by acquaintance
The following describes an inquiry from a person who bought virtual currency after being solicited by an acquaintance and how a problem was solved.
Details of the inquiry
My acquaintance induced me to buy virtual currency for several hours, saying "In the future, virtual currency will be approved by the Japanese government. The value of this virtual currency could increase by hundred or thousand times. Why don't you buy some? If you draw in a newcomer, you can get a referral fee". I didn't think about drawing in someone to get money. I just thought that it would be nice to boost my money, and I bought the virtual currency corresponding to about 200,000 yen.
I wrote an application form at my acquaintance's home. A few days later, I paid about 200,000 yen into the bank account of the business operator. My acquaintance said, "I need to send some documents to the head office. Please bring a remittance slip and identity verification documents". At a later date, I handed them to my acquaintance and I was given a document containing an outline of the transaction. After that, a written contract was delivered to me by the business operator.
On second thought, however, I was worried about the transaction because neither reality of the virtual currency nor contract details was clear. I want to cancel the contract and get my money back.
(woman in her 40s, salary earner)
The National Consumer Affairs Center of Japan (hereinafter called "NCAC") asked the inquirer to send the documents delivered by the business operator and a copy of a screen shown after logging in to the exclusive page of the business operator's website.
The business operator had delivered the inquirer documents, including those required in multilevel marketing transactions under the Act on Specified Commercial Transactions (1) application form; 2) document containing an outline of the transaction; 3) notice of completion of member registration; 4) written contract). The written contract stated that there was the cooling-off system under the Act on Specified Commercial Transactions. NCAC read the document and confirmed the name of the virtual currency. It was found that reality of the virtual currency was unknown. A specified burden in the multilevel marketing transaction was not clearly indicated.
When NCAC received the inquiry, the cooling off period specified on the contract (20 days from delivery of a written contract) was over. NCAC thought it would be possible to execute cooling-off under the Act on Specified Commercial Transactions because the document did not clearly indicate details of a specified burden and was insufficient. NCAC communicated the matter to the inquirer and recommended her to write and send a notification to the business operator to request the cooling-off period.
Shortly thereafter, the business operator told the inquirer that they would accept the request for the cooling-off period. A few days later, all the money paid was returned to the inquirer's account. Accordingly, NCAC concluded the consultation.
Characteristics of recent troubles related to virtual currency
New regulations on virtual currency exchange services have been set up under the revised Payment Services Act (enforced from April 2017). Virtual currencies have received a lot of media coverage, which increased visibility of virtual currencies among general consumers.
Influenced by these trends, inquiries about virtual currencies are on the rise. Virtual currency-related troubles are varied. Recently, these troubles have been often characterized by purchase triggered by word-of-mouth solicitation. Some inquirers were told by their acquaintances "The price will surely rise" and bought some aiming at a gain from selling it, but they recovered no money instead of making a profit.*
Problems in this case
Registration as a virtual currency exchange service provider
NCAC received this inquiry after the enforcement of the revised Payment Services Act, but the date of contract was before the date of enforcement. Since the enforcement of the revised Payment Services Act, business operators have been required to be registered as virtual currency exchange service providers in order to provide exchange services between virtual currency and legal currency in Japan under the revised Act.
When NCAC received the inquiry, the business operator concerned was not registered as a virtual currency exchange service provider. A grace period of six months from the date of enforcement shall be granted to business operators which had started to provide virtual currency exchange services before the enforcement of the revised Act. Therefore, there was no problem even if the business operator kept providing virtual currency exchange service without registration during the grace period. NCAC pointed out some problematic points in the transaction under the Act on Specified Commercial Transactions, considering the facts that the contract had been made as a result of solicitation by an acquaintance and the contract had set a referral fee for introducing someone, and that the business operator had delivered documents required in multilevel marketing transactions.
Reality of virtual currency
Even if a business operator claims that there was a transaction of virtual currency, it is not recognized as virtual currency under the Payment Services Act if the virtual currency has not been actually used. In the case of the inquiry, reality of the virtual currency was unknown and it was unclear if the virtual currency could be certainly used or exchanged after purchase.
Explanation given when solicited
Any virtual currency can be freely traded on the Internet, but the price often changes. There is no guarantee of price increase. The acquaintance of the inquirer, however, emphasized price increase during solicitation, saying "The value of this virtual currency could increase by hundred or thousand times", and did not mention risk of price changes.
Virtual currency transactions are accompanied by risks such as price changes. Consumers need to carefully consider an offer keeping trouble cases in mind instead of focusing on advantages.
The grace period of six months from the date of enforcement of the revised Payment Services Act ended on September 30, 2017. Now, consumers can check reality of individual virtual currencies based on registration of business operators. If there will be any trouble with non-registered business operator, the incident will be reported to the supervisory agency and other authorities to look for glitches in other laws in addition to the Payment Services Act.
- * Be careful when solicited to buy virtual currency by your acquaintance or at a seminar. Don't believe words like "It's surely profitable".
(released on March 30, 2017)