The Japan Virtual Currency Exchange Association (JVCEA), the body that governs the country’s digital currency exchanges, is coming under fire from the Financial Services Agency (FSA), Japan’s financial market regulator.
In a Financial Times (FT) report, a person close to the JVCEA and the government disclosed that the country’s experiment with giving the digital assets industry self-regulatory powers might be failing. According to the source, the FSA has raised the alarm over the slow pace at which the digital assets self-regulatory body is carrying out its affairs.
“When Japan decided to experiment with self-regulation of the cryptocurrency industry, many people around the world said it would not work. Unfortunately, right now it looks as though they may be correct,” the person said.
The report noted that the FSA’s concerns had been centered around delays in implementing crucial Anti-Money Laundering regulations and the management of the body.
According to the minutes of a recent meeting the FSA held with the association, the regulator said that it was not “clear what kind of deliberations the body was having, what the decision-making process was, why the situation was the way it was, and what the responsibility of the board members were.”
The report revealed that the regulator also previously gave the JVCEA “extremely stern warnings” during meetings in late 2021. JVCEA board member Masao Yanaga confirmed the brewing situation, adding that the body itself was in a crisis as well, according to the report. Yanaga was quoted by the news outlet saying that the JVCEA cannot move fast with regulations due to a lack of resources, adding that its members are concerned if the body can make the AML regulations since they would be challenging to implement as it would require international collaboration with other exchanges.
Japan’s history with the JVCEA
Founded in 2018 in the wake of a digital assets market crash, this is not the first time JVCEA has had issues with the FSA. As Bloomberg reports, the body recently came under pressure from the Prime Minister of Japan, Fumio Kishida.
Following Kishida’s comments, the JVCEA has resolved to review its token listing screening criteria. Meanwhile, the JVCEA has also come up with a “green list” of about 19 digital assets that do not need to go through the time-consuming process of screening before they are listed by members of the body.
Additionally, members of the body, including all local digital assets exchanges and international exchanges licensed to operate in Japan, such as Coinbase (NASDAQ: COIN) and FTX, have been under pressure to implement sanctions placed on Russia.
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