Japan’s positive stance on cryptocurrencies just got reaffirmed. “We have no intention to curb (the crypto industry) excessively,” said Toshihide Endo, the commissioner of Financial Services Agency (FSA), Japan’s top financial regulator.
No Plans to Curb Crypto
In a recent interview with Reuters, Endo said that the FSA was trying to promote technological innovation while ensuring that consumers were protected. He also said that they would like to see the cryptocurrency industry grow under appropriate regulations.
The FSA cracked down on cryptocurrency platforms after the $530 million crypto theft from Coincheck, a bitcoin wallet and exchange headquartered in Tokyo. In July, the authority revealed that it was considering regulating crypto exchanges under the Financial Instruments and Exchange Act (FIEA), instead of their current legal foundation, the Payment Services Act, to bolster consumer protection. If the change is implemented cryptocurrencies, which at present are positioned as electronic money, will be considered as financial products thereafter.
Japan’s push for crypto regulation is for good
The rise of blockchain technology and cryptocurrencies is a phenomenon which has left governments across the globe struggling with the issue of how to legally position this new class of assets. Some countries, such as China, have banned cryptocurrencies entirely, some are still brainstorming on how to deal with them, while some are designing regulations which promote their development while ensuring consumer security.
Japan belongs to that class of countries which recognise the disruptive potential of blockchain and cryptocurrencies and are in favour of their growth in a regulated environment. Japan has 16 government-approved and licensed cryptocurrency exchanges, which are also members of the Japan Virtual Currency Exchange Association (JVCEA). The JVCEA recently applied with the FSA to become a self-regulatory body for cryptocurrency exchanges. The body, which was established after the Coincheck hack, aims to restore the trust of the people in the cryptocurrency industry.
In July the JVCEA proposed a limit on how much investors can borrow in margin trading. Among other regulations which the JVCEA has proposed are a ban on insider trading, trading cap for consumers, and trading restrictions on the under-aged and elderly. The FSA, in its investigation of cryptocurrency exchanges, had found out some major shortcomings which include improper registration of users, shortage of employees, lack of basic internal controls to prevent money laundering, and scope for arbitrary price manipulation. JVCEA’s initiatives for more stringent regulations on cryptocurrency exchanges is a move in favour of stronger consumer protection.
In April, a government-backed study group in Japan also proposed guidelines for ICOs which included rules for identifying investors, ensuring KYC compliance and preventing money laundering, enabling traceability of the progress of projects, and protecting consumers from fraud and manipulation. The proposal, which is being studied by the FSA, may become a law in the coming years.
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