Advertisement

Advertisement

Japanese Financial Watchdog Wants To Tighten Crypto Regulations

Japanese Financial Watchdog Wants To Tighten Crypto Regulations

Japan’s Financial Services Agency (FSA) is considering imposing stricter regulations on crypto assets to promote user safety. 

Crypto Exchanges Not Careful Enough: FSA

It looks like the Japanese financial watchdog is not convinced of the merits of cryptocurrency. The agency is looking into innovations in the industry like CBDCs, DeFi, etc., to ensure proper implementation without hampering development. However, despite its strict set of rules governing crypto trading activities, the FSA does not believe that crypto exchanges have taken sufficient measures to prevent money laundering and price volatility. 

FSA Head’s Murky Take On Crypto

Despite FSA Commissioner Junichi Nakajima holding a more receptive mindset towards the asset, the country has still held back on money transfer using crypto. This is because the FSA’s regulations around this asset class only allow speculation and light investment. However, with the crypto sector expanding constantly, technologies like DeFi are posing new challenges. Nakajima noted, 

“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto-assets.”

Nakajima Justifies Tight Grip Approach

However, it is possible that the FSA is keen to understand more about crypto, as it recently set up a study group comprising of external subject matter experts. Crypto-enthusiasts in the country are hopeful that authorities will revisit their regulatory approach to DeFi in the upcoming months. Thankfully, Nakajima understands that the stricter regulations have hurt many of the 31 registered exchanges, pushing them into a financial struggle. 

However, he has clarified his strict stance on these digital assets as unlike stocks, cryptos do not have underlying assets and are therefore susceptible to drastic price swings. Citing this as the reason, Nakajima discussed not allowing crypto-investment trusts, despite them being an easy way for the new investors to gain exposure to the asset class.

Japan’s Regulation Journey In A Nutshell

All Japanese exchanges need to register themselves with the financial authority. This rule was put into place back in 2017 when Nakajima and other drafted Japan’s first regulatory framework on crypto-assets. However, most exchanges failed to incorporate stricter internal regulations, which jeopardized customer protection. In 2018, the Tokyo-based exchange Coincheck Inc lost a lot of money because of massive coin theft. This moment acted as a wake-up call for the FSA, and in 2019 they tightened up regulations on crypto exchanges, imposing stricter mandates for customer asset protection. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Related TAGS:

You can share this post!

Advertisement