Japan’s New Crypto-Related Regulatory Measures
The Financial Services Agency (FSA) of Japan releases a more all-embracing draft report on cryptocurrency regulations. The points accounted in the draft are ICO regulation and self-regulations, dealers, crypto custody and security measures, derivative products, margin trading, and privacy-heavy coins.
This is the 11th study group held by the FSA to discuss the skeleton that will make up the much anticipated regulatory guidelines for the cryptocurrency market. The meeting resulted in the publishing of a draft report which also included points taken from the prior meetings. So far, none of the members rejected the proposed rules.
ICO Regulation and Self-Regulation
According to the FSA, security regulations can apply to ICOs, based on its business structure. Japan has two existing laws that can qualify a fit to the fundraising method: the Financial Instruments and Exchange Act and the Fund Settlement Act. The agency also encourages setting up guidelines by third parties to closely look into companies that plan to issue tokens.
Back in October, the FSA granted the JVCEA, or the Japan Virtual Currency Exchange Association, the right to self-regulate. This will come into play as the agency perceives the significance of cryptocurrency platforms working together with JVCEA in order to elaborate on procedures contingent to the prescribed rules. Those who refuse to be a part of an accredited association will be refused authorization, as well as those who neglect to follow self-regulatory standards.
The So-Called Dealers
Crypto exchanges permitted to operate pending their applications are called, as the document states, ‘deemed dealers’. Currently, there are three considered as deemed dealers, these are Coincheck, Everybody’s Bitcoin, and Lastroots. These businesses are prevented from expanding, adding support to new coins, and taking in new platform users. The FSA is aware that a number of operators without licenses are advertising and expanding fast; users are oblivious to its current regulatory status.
Security Measures and the Problem of Hacking
This year hackers targeted Japanese crypto exchange Coincheck and Zaif. In order to arrest future hacking incidents, the FSA will necessitate exchanges to improve their management of users’ private keys. Just in case of a hack, total assets of exchanges need to be at least equal to the ‘amount equivalent to the currency and repayment of funds’.
The FSA included rules that will govern crypto-custody. A standardized registration system, an internal control system, and segregating digital assets between those owned by the exchange and the users are among the policies stated within the draft report.
Derivatives, margin trading, and privacy coins will be restricted.