Japan’s Financial Services Agency (FSA), responsible for the regulation of cryptocurrency operators in the country, will reportedly change the current policy towards crypto exchanges.
Local news outlet, Sankei reports that the Japanese financial regulators are considering ditching the current regulatory regime, the Payment Services Act, for the Financial Instruments and Exchange Act (FIEA). This comes as the FSA reviews the recommendations of its sponsored Study Group on Virtual Currency Exchange Industry. The study looked at regulation of the virtual currency exchange industry and the problems of the existing legal system.
According to the report, customers of cryptocurrency exchanges will be better protected and the FIEA requires securities firms to treat customer funds and assets separate from its corporate assets.
Currently, cryptocurrencies are treated more like currencies (as electronic means of payment) but the FEIA describes that they would be treated as financial products.
Furthermore, an FIEA regime will pave the way for the offering of cryptocurrency derivatives like exchange-traded funds (ETFs) which would increase the volume of cryptocurrency trading.
This reported plans to change regulatory policy comes after the country suffered one of the worst cryptocurrency heists in history while under the former regime. Saneki believes that the hack on Coincheck exchange which cost about $530 million worth of NEM tokens contributed to FSA’s considerations. The FSA commissioned investigations into other cryptocurrency operators liken Coincheck which was pending approval and issued several Improvement orders.
Regulations have also been strengthened since the attack. Both the government and the cryptocurrency community have imposed rules to avoid a repeat of the incident. Under the aegis of Japan Virtual Currency Exchange Association (JVCEA), the registered cryptocurrency exchanges in the country agreed to observe the government’s anti-money laundering (AML) regulations and also prohibit the trading of cryptocurrencies with strong anonymity features.