Citing unnamed but informed sources, Japanese publications are reporting that a working group under the Financial System Council have complied a draft of Japan’s first ever cryptocurrency regulations.
Under the new proposed rules, bitcoin exchanges and those dealing with virtual currencies must register with the government to fall under a regulatory framework.
The rules, as reported by The Japan Times, are drafted by a working group under the Financial System Council (FSA). The proposals and discussion for the new rules began yesterday, while the bills required to enact the new rules and measures are expected to be introduced during the Japan’s Parliament session, the Diet, next year.
Ever since the collapse of Mt Gox, what was once the world’s largest bitcoin exchange, there have been increasing calls for protecting virtual currency users by regulating alternative currency exchanges.
Some of the speculated regulations and considerations include:
- Bringing registered cryptocurrency exchanges under Japan’s anti-money-laundering laws.
- Mandating exchange operators meet certain pre-set financial conditions such as having a minimum amount of capital.
- Another stipulation may include requiring operators manage customer assets separately from corporate assets. This would also help with clarity in the case of bankruptcy.
- Mandatory external checks from certified public accountants or auditing firms that exchange operators will have to undergo.
- Exchange operators will also be obliged to confirm their clients’ identities when opening new accounts.
- Operators will also be obliged to report questionable trading patterns to authorities.
- Transaction records will have to be maintained and stored by operators.
- Operators will also be responsible for security measures and the computer systems required to protect their users’ information.
Fundamentally, the proposed regulations can be seen as an effort from the regulators and authorities to reign in exchange operators to have them function in a way similar to everyday financial institutions. Nikkei’s report adds:
THE FSA could inspect the exchanges, issue orders to remedy faults and shut down noncompliant operations.
The calls for regulation comes in the aftermath of the infamous Mt Gox debacle that saw Tokyo’s police investigate the exchange and the loss of 850,000 bitcoins. As the cautionary tale unraveled, Mark Karpelès, founder and CEO of the exchange was arrested earlier this year in March with the charge of embezzlement filed against him. In late October this year, he faced new charges for embezzlement while it was also revealed that he spent an unspecified sum on prostitutes.
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