Japanese Regulators Publish New Draft for Domestic Cryptocurrency Framework

Journalist:
December 17, 2018

Late last week, the Financial Services Agency (FSA), the top financial regulator in Japan, published a draft report which outlined the new framework for addressing cryptocurrencies and Initial Con Offerings (ICOs) in the country. The report was released following with the 11th study group meeting of the agency, and it contained a cumulation of recommendations from the previous ten sessions.

As a regulator, the FSA has to submit bills and stay accountable to the Japanese parliament, however, the agency is also responsible for supervising financial activities in the country, with companies seeking to issue investment vehicles and assets being required to register and get proper accreditation from the agency. This report, which has been the subject of numerous rumors, is seen by many as a definitive stance by the Japanese government on cryptocurrencies, a move yet to be made by most developed countries till date.

In the report, the FSA acknowledged the fact that technological innovation is continuously changing, and it has come to see the importance of collaboration with other authorized regulatory bodies.

“Because of this, we urge contributors to sign up for the qualified [self-regulatory] affiliation,” the document reads.

This way, the agency is expected to help improve techniques following the country’s laws. Back in October, the Japan Digital Foreign Money Trade Affiliation was accredited by the FSA with the aim of effecting self-regulatory laws in a legal framework. With this accreditation, the industry body was given the means to develop guidelines for domestic cryptocurrency exchanges, including measures to ensure that money laundering and insider trading are curbed.

As expected, the regulator placed restrictions on privacy coin listings, margin trading and transactions in derivatives.

Japan is the first major economy in the world to recognize bitcoin as a valid method of payment.

On the issue of ICO regulation, the FSA explained that specific tokens might be subject to regulation depending on how they are structured. ICOs would be under the purview of the Financial Instruments and Exchange Act.

The report also addressed the existence of “deemed dealers,” companies which have gotten the leeway to operate cryptocurrency exchanges while reviewing their applications. It points out that while a lot of these dealers have been advertising their platforms and urging people to sign up, many their customers are still unaware that they aren’t registered.

Concerning deemed dealers, the report proposed some regulatory measures. First, it established that they should not be able to expand their portfolio of coins until they get proper registration. Also, they won’t be able to get new customers or promote their services as well. They must also be made to notify their existing users of their situation viz-a-viz registration.

Reports in local media show that there is little to no any opposition to the proposed measures, and this means that the content of the draft is expected to form the new regulations of the agency. Earlier in August, new FSA Commissioner Toshihide Endo had told Reuters in an interview that the agency had no plans to shut down the cryptocurrency sector.

“We would like to see it grow under appropriate regulation,” he had added, at the time.

Images from Shutterstock.

Last modified (UTC): December 17, 2018 11:16

Tags: FSAjapan
Jimmy Aki @adejimi

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.