On Oct 24th, 2018, Japan’s Financial Services Agency (FSA) allowed the Japan Virtual Currency Exchange Association to self-regulate. The move is a big boost for the Japanese Cryptocurrency industry that has long been seeking self-regulation.
The approval by the FSA provides the Cryptocurrency industry with the right to enact rules that will prevent money laundering, safeguard customer asset, and provide operational guidelines. Additionally, the Japan Virtual Currency Exchange Association will be tasked with policing compliance within the industry.
For an industry that has been hit by large-scale thefts, the government has been making concerted efforts to ensure that the industry is adequately regulated.
In 2017, Japan made headlines by being the first country to regulate cryptocurrency exchanges in an effort to encourage technological innovation, while ensuring consumer protection is guaranteed. Under the regulations, all Exchanges operating in Japan have to register with FSA.
Japan, the domicile of most active cryptocurrency exchanges, has also been the centre of two of the biggest known crypto hacks in history- the Mt. Gox fiasco of 2014, and the stealing of close to $500 million worth of tokens from Coincheck Inc. in January 2018.
When there was a theft of Bitcoin Cash, Monacoin and Bitcoin in September 2018 from Zaif, an exchange owned by Osaka-based Tech Bureau Corp, both regulators and industry were widely blamed for the mess. In the theft, approximately 2.2 billion yen ($19.6 million) of stolen digital assets belonged to the exchange while the rest was client money
Reportedly, a senior FSA official who declined to been named in a briefing said that:
“It’s a very fast-moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do,”
According to Yuri Suzuki, senior partner at law firm Atsumi & Sakai, self-regulatory body’s rules are more stringent than the existing law. She expects these laws to be helpful in industry regulation and help in restoring public trust.
Suzuki, a crypto enthusiast who follows developments both locally and overseas further opines that:
“The self-regulatory body’s workload is likely to be heavy and there is an issue of whether it can secure enough staff with expertise in crypto exchange business,”
Currently, there are 16 licenced crypto exchanges in Japan and the FSA has been more stringent in the approval process. Actually, since the December 2018, the FSA has not provided any approval to new entrants.
FSA on Oct 24, 2018, published a set of guidelines for those applying to run crypto exchange. More than 160 entities have already declared an interest in running crypto exchanges.