Key Takeaways
- Japan’s FSA has proposed new amendments to prevent crypto exchanges from transferring assets overseas in case of bankruptcy.
- The FSA’s move aims to protect investors and prevent another FTX-like fiasco.
- The new regulations mark a significant shift in Japan’s approach to the crypto industry.
In a bid to safeguard investors and prevent a repeat of the FTX debacle, Japan’s financial watchdog has unveiled a sweeping reform package that would stop crypto exchanges from spiriting away customers’ assets overseas in the event of bankruptcy.
Japan Proposes Stricter Crypto Exchange Regulations
The Financial Service Agency (FSA) has tabled a new “holding order” that would apply to all crypto exchange companies registered under Japan’s Payment Services Act.
This marks a significant expansion of the FSA’s regulatory purview, as previously, holding orders were only available to businesses registered as financial instrument exchanges under the Financial Instruments and Exchange Act.
Under the proposed amendments to the Payment Service Act, crypto service providers such as exchanges would be forbidden from transferring Japanese residents’ assets to foreign platforms.
The new rules would instruct crypto exchanges in Japan to keep domestic assets entrusted to them by customers within the country rather than allowing them to flee to foreign shores in times of financial distress.
According to the FSA’s database, 29 registered crypto exchanges in Japan would be affected by the proposed regulations, Nikkei reports.
The FSA’s move is seen as a belated response to the collapse of FTX, which operated in Japan before its ignominious demise in 2022.
The proposed regulations are a tacit admission that Japan’s regulatory framework has failed to keep pace with the rapid evolution of the cryptocurrency ecosystem.
Japan Wakes Up to Crypto Reality
Despite being one of the first countries to issue formal guidelines for cryptocurrency usage in 2017, Japan has struggled to stay ahead of the curve.
Its onerous tax regime has acted as a deterrent to investment, and its regulatory framework has failed to adapt to changing market dynamics.
However, with a new pro-crypto prime minister at the helm, Japan appears to be refocusing on the cryptocurrency space.
The government is currently reviewing its tax policy with a view to reducing the burden on investors and paving the way for institutional investors to access crypto-based investment products.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
Beyond his professional pursuits, Prashant is an avid music enthusiast, often exploring diverse genres to unwind. A sports lover, he has a particular passion for cricket and frequently engages in discussions about the game. His multifaceted interests and sharp journalistic instincts make him a valuable contributor to CCN, where he continues shaping the crypto landscape's narrative.
