If a report from Nikkei Asian Review is to be believed, Bitcoin exchanges operating in Japan may soon have to get registered with the government, be open to external audits, and put in place adequate consumer protection measures.
Japan has been dilly-dallying with its stance on cryptocurrencies such as Bitcoin, but the first draft of cryptocurrency regulations may bring much-needed clarity into the picture. We had previously reported that Japan is working towards a regulatory bill for Bitcoin by early 2016.
A Financial Services Agency (FSA) panel is slated to discuss the regulation proposals from Thursday. According to the draft, digital currency businesses and exchanges would have to implement AML/KYC laws, maintain and store transaction records, and report suspicious transactions. The nature of suspicious transactions hasn’t been made clear; it could be anything. A case of panic selling or a promoter selling his stake in the Bitcoin company may seem suspicious to the regulator.
After the massive fall of the then world’s biggest Bitcoin exchange Mt. Gox, in which investors lost huge amounts of money (some even their life savings), the Japanese government has been mulling over putting such business operations under the scanner. But businesses have been conducting until now without any regulations, making the consumers prone to similar events.
According to the report, some basic measures have to be adopted by the businesses such as protecting the clients’ personal information, maintaining minimum capital reserves, and opening their financial logs to external audits. These are very typical operations of a traditional financial exchange. Stringent actions will be taken against businesses refusing or failing to comply with the enacted laws and regulations, even leading to a complete shutdown.
A proper regulatory framework for Bitcoin exchanges may induce confidence among investors to pour money into the system. Japan has been lagging in the fintech race, being led by China and UK, and such measures may provide the much-needed boost.