Cryptocurrency exchanges will regulate themselves
Japan’s thriving cryptocurrency market will have a new self-regulatory body next month – a move that must be welcomed by all fit and proper industry leaders and also by the wider public.
This new agency will see the licensed cryptocurrency exchanges, represented by two trade organisations in the country, introducing and implementing standards in April for the country’s Financial Services Agency (FSA), in an effort to improve security and compliance procedures among them. It will also develop standards for initial coin offerings (ICOs), the cryptocurrency equivalent of IPOs.
The regulatory body, the name of which is yet to be announced, is the result of the two trade groups – the Japan Cryptocurrency Business Association (JCBA) and Japan Blockchain Association (JBA) – reaching an agreement last week.
This move in Japan is the latest important development towards what I believe will ultimately result in regulation on a global level for cryptocurrencies.
Of course, each jurisdiction is looking at this issue differently. For instance, Japan is heading for self-regulation, whereas the official financial regulator of South Korea, another major Asian crypto market, last week promised normalization in cryptocurrency trade and signalled a willingness to help promote blockchain technology.
In whatever form it comes, a progressive regulatory environment in this area should be welcomed for many reasons.
Cryptocurrencies are here to stay – the genie has been let out of the bottle, with an increasing number of people and institutions investing in the likes of Bitcoin, Ethereum, Ripple, Litecoin and Dash
Firstly, cryptocurrencies are here to stay – the genie has been let out of the bottle, with an increasing number of people and institutions investing in the likes of Bitcoin, Ethereum, Ripple, Litecoin and Dash. This demand is only likely to gain momentum as knowledge and awareness grows amongst the public and as scalability matters are being tackled to bolster the transaction processing capacity. Also, precisely because financial regulatory bodies around the world are increasingly looking to regulate cryptocurrencies, which will give investors even more protection and confidence in the market.
Secondly, tough rules will be the most effective way to combat cryptocurrency criminality. For those who shrug off this concern, one only has to look at the half-a-billion-dollar theft in Japan that has brought about this new self-regulatory body.
Thirdly, there will be less potential risk for the disruption of global financial stability, and the more potential opportunities there will be for higher economic growth and activity in those countries which introduce it.
This is why Japan’s so-far-unnamed self-regulatory agency is a huge step in the right direction for the burgeoning industry. The Japanese crypto market is enormously influential and I expect other jurisdictions’ policies will be shaped by what happens here. This is especially true as other nations see the benefits that Japan, a country that sought to embrace cryptocurrencies early on, is receiving from its proactive approach.