Japan’s Financial Services Agency (FSA) has granted the cryptocurrency industry self-regulatory status, reports Reuters. Japan’s Virtual Currency Association will now be responsible for policing and sanctioning digital money exchanges for violations. The Japanese cryptocurrency market is one of the largest in the world, but has been under heavy government and public scrutiny following two-large scale exchange hacks.
The Virtual Currency Association’s New Responsibilities
The Virtual Currency Association will now be responsible for protecting investor assets, establishing operational guidelines and preventing illicit activity, such as money laundering. The Japanese police will be complicit in supporting the regulations put in place by the association.
“We will make further efforts to build an industry that is trusted by customers,” said one representative from the Virtual Currency Association following FSA approval.
“It’s a very fast moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do [sic],” said an unnamed FSA official.
In 2017, Japan became the first country to regulate crypto exchanges, not with the intent of slowing innovation, but in an effort to support growth and ensure customer protection. A policy was put in place which required all crypto exchanges to be registered with the FSA.
The established regulation was called into question, however, after Tech Bureau Corp’s Zaif exchange was hacked for $60 million in cryptocurrency in September of this year. The exchange had failed to make sufficient security improvements, which had been ordered twice by the FSA. This was less than a year after Tokyo-based cryptocurrency exchange Coincheck lost $530 million in a similar incident in January.
Senior Partner at Atsumi & Sakai Yuri Suzuki told Reuters that she expects much stricter oversight and rules from Japan’s Virtual Currency Association, which could help the public regain its faith in the digital money market. However, she also has her concerns.
“The self-regulatory body’s workload is likely to be heavy and there is an issue of whether it can secure enough staff with expertise in crypto exchange business,” said Suzuki.
The FSA published a set of recommended guidelines today for companies interested in running crypto exchanges. 160 startups are reported to have shown interest. Currently, there are 16 approved crypto exchanges in Japan, with the most recent exchange being approved last December.
“We are looking into more details than before,” said an FSA offical, who was optimistic about the incoming support from the Virtual Currency Association. “In that sense, the approval process has become more strict.”