A recently released report indicated that Financial Services Agency, Japan’s financial regulator, has begun taking significant steps to revise the country’s current regulatory framework on cryptocurrency exchanges. It was reported that this change of heart is in a bid to uphold and enforce customer protection practices, while also providing a more secure atmosphere for crypto investors.
FSA to Revise Financial Instruments and Exchange Ac
Sources claimed that last year in April, the FSA enacted specific regulation which recognized bitcoin as a valid legal tender in Japan. The regulation reportedly came into existence shortly after the amendment of Japan’s Payment Services Act. In addition to its recognition of bitcoin as a valid legal tender, sources claimed that it also had mandatory registration provisions for operators of locally-operated cryptocurrency exchanges and the registration reportedly came with a license issued by the FSA. However, following a conclusion that its current mechanisms for customers’ protection were inadequate, FSA has allegedly begun to make plans to revise the fundamentals of its 2017 cryptocurrency exchange regulations.
Further, it was reported that the FSA’s changes would be on specific terms, including making the cryptocurrency exchange sector a sub-sector under the Financial Instruments and Exchange Act (FIEA) as it would widen the scope of laws which were originally applicable to traditional stock brokerages and securities firms to cover regulation of the activities of cryptocurrency exchange sector. The Act also has stronger and stricter measures for regulating investment activities, and one of such is that it makes it mandatory for all companies which fall within its scope of regulation to keep their customers’ fund separate from the corporate funds. In addition, FIEA reportedly has stricter measures regulating trading within companies.
NEM Token Theft Spurred FSA’s Recent Regulatory Actions
The report expressly indicated that the $530 million NEM tokens theft from Coincheck stood as the core reason for the proposed regulation changes. Media outlets reported that the NEM tokens theft also spurred FSA to take other regulatory actions in the cryptocurrency exchange sector, such as suspending some crypto exchange businesses, spot-checking exchanges, refusal to register a crypto exchange and issuing orders to six licensed Japan exchanges to make improvements to their business operations.
The report suggested that if the proposition to bring cryptocurrency exchange within the ambit of FIEA scales through, cryptocurrencies would automatically become financial products and the new status would cause the digital currency to gain a more extensive exposure on global stock markets. It will be recalled that media outlets reported that Tokyo Financial Exchange sometime in 2017 made known its plans to list bitcoin as a financial product on its platform.
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