Japan’s Financial Services Agency (FSA) has tightened its controls over the industry after publishing a new set of guidelines for all prospective exchange. Initially reported by Japan Times on September 2, the new move will see companies looking to receive regulatory approval undergo a 400-point test. Extended the current licensing procedure, the FSA’s new system will delve into an exchange’s management team, their decision-making process and whether the company has any criminal connections.
The recent move is part of Japan’s ongoing regulation of cryptocurrencies. Following an amendment to the Payment Services Act in April 2017, Bitcoin et al have been recognized as legal payment methods. As a result, crypto businesses and exchanges have been required to get FSA approval before offering their services to Japanese residents. The move towards greater regulation is a result of multiple high-profile hacks. At the start of 2018, seven exchanges, including Coincheck, were victims of hacking groups.
Japan Becoming the Epicenter of Crypto Regulation
Following the theft of $530 million in virtual coins, the FSA ordered a number of exchanges to cease operations pending further checks and pay multi-million-dollar fines. In the wake of these incidents, active companies have been forced to improve their security provisions and, moreover, prove their legitimacy to Japan’s financial regulator. To help improve standards, 16 local exchanges have applied to form a self-regulatory body known as the Japan Virtual Currency Exchange Association (JVCEA).
Although in an embryonic stage, the body would be subservient to the FSA but work to impose industry standards across all registered exchanges. At this stage, the JVCEA is still being considered. However, with Japan continuing to push the agenda when it comes to crypto regulation, it’s likely this group will be given the greenlight in the coming months. Until then, any exchanges wanting to go live in Japan will need to pass the strict tests now being applied by the FSA.
For consumers, the news couldn’t come at a better time. With the global market bearish and stories of hacked ICOs and Ethereum Twitter scams dogging the industry, more regulation can only be seen as a good thing. The news should prove particularly positive for those invested in Ripple. At the close of 2017, the Ripple’s market cap surpassed Ethereum’s for a short period after the company made significant inroads into Asia. As major banks in Japan and South Korea agreed to trial the xRapid payment platform, Ripple’s value topped $76 billion.
Ripple’s Position Should Strengthen as Regulation Increases
Although recent months have seen the project’s value take a tumble, there are many that still believe Ripple is one to watch. Indeed, perhaps the most interesting point to consider in light of the recent news from Japan is the company’s work with major financial institutions. At the close of August, Ripple CTO Stefan Thomas hinted that American Express was now close to integrating the product into its system. Although the credit card provider is yet to confirm full adoption, the latest news could help.
By having the necessary credentials to gain regulatory approval in Japan, Ripple must be doing something right. From this, financial authorities in other countries are more likely to take note of what the company has to offer. For the likes of American Express, financial regulation makes it easier to integrate a product. To put it another way, if Ripple wasn’t regulated, a regulated company like American Express would struggle to convince regulators it can use the technology safely. Of course, the situation is more complex than that. Firstly, regulation in one country doesn’t directly correlate to regulation in another. Secondly, xRapid hasn’t yet been officially adopted by a bank inside or outside of Japan.
Are there Positive Times Ahead for Ripple?
However, despite the what ifs, the news could certainly buoy the price of Ripple’s XRP coin as we move towards the end of 2018. So far this year, XRP has dropped from a high of more than $3 in January to just over $0.30 at the start of September. While much of the negativity is a result of the market’s overall downward trend, the results have been less than encouraging. However, with Ripple standing as one of the cooperative projects both in terms of working with banks (instead of against them) and regulators, the evolving legal landscape should give investors a reason to smile. Japan’s new regulations aren’t going to instantly transform Ripple’s fortunes. However, it is one of the region’s biggest cryptos and, so far, it’s shown a willingness to work with, rather than against, established systems. Based on this, the recent FSA announcement should be seen as a positive.
The post Japan’s FSA Tightens Crypto Regulations to Help Ripple appeared first on The independent republic.
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