Japan’s top financial regulator has responded to media reports that it is considering overhauling the way cryptocurrency is regulated in the country. The authority has been under fire for the inadequacy of its crypto exchange registration process after it issued business improvement orders to a number of exchanges it previously approved.
FSA Reportedly Considering New Crypto Law
On Tuesday, June 3, the Sankei Shimbun reported that Japan’s top financial regulator, the Financial Services Agency (FSA), is considering overhauling the way cryptocurrency is regulated in the country. The news outlet claims that the FSA is mulling over switching from using the revised fund settlement law to the Financial Instruments and Exchange Act (FIEA), elaborating:“Virtual currency is considered a means of settlement, the same as electronic money etc. by the revised fund settlement law, but if it becomes subject to the regulation by the Financial Instruments and Exchange Act, it will be treated as a financial product.”
The FIEA “obliges securities companies and others to manage customer funds and securities (stocks, etc.) separately from corporate assets,” the publication noted. In addition, companies must establish “a strict investor protection system, such as forbidding insider trading of stocks.”
Impress Corporation subsequently published the FSA’s response to the reports by the Sankei Shimbun and a few other local publications. After contacting the agency to verify the news, the publication quoted the agency conveying, “there was no such fact.”
The news outlet added that the FSA regularly holds a research meeting with academics experts, financial practitioners, institutional members, and other industry participants to respond to various problems surrounding the crypto industry.
The FSA told the news outlet:“If there are such considerations, it will be taken up as an agenda for the study group…the [said] agenda has not been discussed at all in the past 4 meetings…Things that are not on the agenda at all cannot be considered.”
Speaking to news.Bitcoin.com, Ken Kawai, Partner at law firm Anderson Mori & Tomotsune, also expressed his doubt of the source of the news, commenting:“In the long run it may happen but not soon. However, cryptocurrency derivatives including futures, swaps, options and CFD may become regulated under the FIEA relatively earlier.”
Current Law Inadequate
The revised fund settlement law went into effect in Japan in April last year, effectively legalizing cryptocurrency as a means of payments and requires crypto exchanges to register with the FSA. So far, the agency has fully approved 16 crypto exchanges.
However, following the hack of Coincheck in January, the agency has tightened its oversight of crypto exchange operators and have found some of the 16 licensed exchanges to have inadequate internal systems. In March, the FSA issued business improvement orders to two of them – Tech Bureau, which operates the Zaif exchange, and GMO Coin.
Then on June 22, the agency issued business improvement orders to six licensed exchanges: Bitflyer, Bitpoint Japan, Btcbox, Bitbank, Quoine, and Tech Bureau. Bitflyer is Japan’s largest crypto exchange by volume.
Following these orders, the FSA has come under fire for how it approves crypto exchanges. The Sankei Shimbun elaborated, “If the management of the exchange is deteriorated, the mechanism to protect customer assets is insufficient,” adding that by regulating cryptocurrencies with the FIEA as securities, “it will lead to the strengthening of user protection.”