Business 23 August 2018Gerald Fenech
Japan’s FSA vows support for crypto industry—if properly regulated
Japan is one of the countries where cryptocurrency and blockchain have a head start in terms of adoption, although the growth has stalled of late. As usual in the industry, this year has been a disaster for most cryptocurrency firms, exchanges and other projects which have seen values plummet, scams proliferate and frauds shoot up all over the place.
However, all is not lost in the Japanese crypto space since Japan’s Financial Services Agency (FSA), which previously had come down like a ton of bricks upon the industry in general, has promised to ensure that the domestic crypto sector will grow “under appropriate regulation.” This is a stance being taken in several countries including South Korea, Switzerland and Malta, with Thailand and Venezuela already far advanced in introducing cryptocurrencies as standard practice.
Toshihide Endo, commissioner of Japan’s FSA, told Reuters the agency’s goal is to find a “balance” between consumer protection and technological innovation, pointing out: “We have no intention to curb [the crypto industry] excessively. We would like to see it grow under appropriate regulation.”
In 2017, Japan passed a landmark law recognizing cryptocurrencies as a method of payment “for the cost of purchase or rent of items or receipt of services and which can be transferred by means of electronic data processing systems.”
However, the FSA took a tougher stance towards the industry following the $530 million theft of digital money from Tokyo-based Coincheck in January.
FSA inspections found bad management at many of the exchanges, saying they lacked basic internal controls to protect users and prevent money laundering. As a result, some exchanges were ordered to temporarily suspend operations. Several weeks ago, the FSA determined that several changes need to be made to the regulatory framework of new companies looking to receive a license to launch an exchange.
The Japanese financial regulator had been considering changing the legal basis for regulating crypto exchanges to oversight by the Financial Instruments and Exchange Act (FIEA), instead of its current legal foundation, the Payment Services Act. This would make it easier to trade in cryptocurrencies although so far nothing has come out of this proposal.
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Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
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