Japan’s tightrope walk to crypto legality
As the global crypto trading clampdown continues, Tokyo is amending existing laws to create a robust regulatory framework that includes ICO launches
Asia is a hotbed for the cryptocurrency market and with Japan experiencing high profile hacks, its financial authorities are taking the lead on regulation, but without killing the market, as seen in other Asian countries.
These regulatory moves are clearing the air in the market, as seen by Mitsubishi UFJ Financial Group’s announcement earlier this month about its launch of a new blockchain service, to realize what they call “the world’s most scalable and fastest payment processing platform,” that will be accompanied by what market observers say will be the bank’s own crypto-currency.
The launch will bring “a diverse payment service … for a significant reduction of transaction costs for all kinds of payment services and could support a large expansion in transaction numbers.”
Such high-profile platform launches show Japan is learning from its past issues with crypto. These include the robbery of Tokyo-based crypto-currency exchange Mt Gox, at the time the world’s largest virtual currency broker, which lost 650,000 Bitcoin in 2014. Following this, exchange Coincheck lost more than $530 million in January 2018, with the theft of more than 500 million NEM tokens.
Yet whereas such bad news stories have seen China and Korea clamping down, Japan has remained progressive and has instead chosen to learn from its early experiences to create a framework for regulation.
Japan’s Financial Services Agency (FSA) made amendments to the Payment Services Act in 2016, long before the Coincheck heist, to introduce registration requirements on virtual currency exchange service providers – or virtual currency broker dealers – and also put in place regulations for user protection and customer identification.
The FSA told The Asia Times that these moves were prompted by the wide spread use of virtual currency by investors; as a way to counter money laundering and terrorist add financing; and as a reaction to the Mt Gox hack.
This was followed by further FSA regulation on the market in March 2018, including censure for several operators, which need to be registered with the FSA. “Under current laws and regulations certain tokens fall under the category of virtual currencies in the Payment Services Act. Therefore, exchange service providers of such tokens need to register with the FSA,” the regulator told Asia Times.
Also, compared with other Asian markets, Japan doesn’t seem to be taking the brakes off ICO launches. The FSA told Asia Times that ICOs falling under the category of virtual currency come under the Payment Services Act, so need to register. But if they do, they can continue as planned. “If the ICO is for investment purposes, the purchase of a token by virtual currency will be considered equivalent to that by legal tender. Such ICOs will be subject to regulations under the Financial Instruments and Exchange Act,” says the FSA.
However, despite the all-round positivity, the FSA is still calling for an outright ban on crypto currencies that offer privacy-rich features, including Monero (XMR), Dash (DASH), Augur’s reputation token (REP) and ZCash (ZEC).
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