Japan Releases a New Draft Report for Cryptocurrency Regulatory Framework
Japan’s topmost regulatory body - the Financial Services Agency (FSA) has published a new draft report while outlining the regulatory framework for digital currencies and Initial Coin Offerings (ICOs), last Friday. The latest report is the outcome of the unified recommendations obtained from the ten previous sessions.
The job of FSA is to constantly monitor all the financial activities taking place in the country. Furthermore, the FSA needs to present the bills in a timely manner during the parliamentary sessions.
Some of the local media sources said that the proposed regulatory measures saw no objection, and so its looks like a definitive stance from the FSA and it will most likely proceed towards drafting the regulations.
The FSA report touches down on a number of issues to be reported. The most important is taking strong measures to deal with the illicit hacking incidents. This year two major hacks - Coincheck and Zaid - has hugely affected Japan’s local crypto market.
Considered to be one of the most crypto-friendly nations, there was a huge negative sentiment developed among Japan’s local crypto investors. In the draft, the FSA notes that the exchanges need to take effective measures for “management and maintenance of customer property,” such as the private keys. The FSA also asks exchanges to create sufficient backup in event of hack. Thus exchanges need to make sure that they have net assets “equal to or more than the amount equivalent to the currency and repayment funds”.
The FSA also notes that it will collaborate with the self-regulatory organizations to address issues pertaining to crypto regulations in a better manner. “For this reason, we urge members to join the certified [self-regulatory] association” says the FSA. In case if the operator fails to join “the accredited association and conform to the self-regulation,” the FSA might even consider to cancel their registrations debarring them from any further business activity.
Furthermore, the report also mentions about the restrictions on the listing of privacy coin tokens, margin trading, and derivative transactions. Most importantly, it speaks on introducing regulatory measures for ICOs saying that they “can be subject to the securities regulation”. Based on the structure of offering, tokens can be subject to regulations by Fund Settlement Act and the Financial Instruments and Exchange Act. The FSA might also seek the help from third-party organizations in forming the ICO regulatory framework.
Lastly, the FSA report talks about regulating the crypto custody business which is currently not under the existing laws. In this case, the FSA proposes developing an internal control system or introducing a registration system.