The Financial Services Agency, Japan’s market regulator, is taking its first steps towards drafting a more restrictive policy for regulating digital currency in the country, in a move that looks set to tighten the rules for digital currency sector businesses.
According to reports in local media Jiji Press, the rule changes are being brought in with a view to better protect consumers, with the regulator having already begun to solicit views on how the new policy could shape up.
The regulations are expected to be brought in before summer 2022, with a view to providing greater investor protections as quickly as possible. With an eye on continuing to encourage innovation and development, the FSA has said the new rules would bring much needed stability to the sector.
It follows the creation of a dedicated panel of experts last month to look at the issues of regulation in decentralized finance, joining other ongoing efforts to address developments in central bank digital currencies and digital currency more broadly.
Japan has historically taken a progressive approach to digital currency, encouraging the development of initiatives in digital currency and blockchain technology. Some of the earliest crypto trading platforms and exchanges were founded in Japan, and the country continues to be a regional hub for trading in East Asia.
Following the substantial Coincheck hack in 2019, a series of new regulations were brought in to strengthen the security at exchanges, and to offer investors a better quality of protection against future attacks. As part of the measures, the FSA has required digital currency platforms operating in the country to register and adhere to its compliance requirements.
The measures have failed to prevent repeat attacks. However, with new regulations coming down the track, and in particular the Financial Action Task Force’s (FATF) Travel Rule which is expected to be adopted by 2022, the regulator is hoping to provide more robust oversight for the sector.
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