Japan’s Financial Regulator Releases A Draft Report On Cryptocurrency Regulation

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Japan’s financial regulator, the Financial Services Agency (FSA), recently published a draft report in which it outlines a new regulatory framework targeting the country’s cryptocurrency and Initial Coin Offering (ICO) markets.

The draft report also proposes restrictions on listing privacy coins, margin trading, and derivative transactions as well as introducing new requirements that should protect consumers against hacks.

The FSA draft had been discussed during the regulator’s 11th study group meeting and contained recommendations raised during the other ten meetings.

According to local media reports, the draft wasn’t objected to, and that gives the financial regulator go-ahead to craft regulatory guidelines based on the document.

As Japan’s principal financial regulator, the agency is required by law to submit all of its bills to the country’s parliament and to maintain accountability.

However, the agency has another crucial role, which is to provide supervisory oversight over all financial activities in the country.

That includes ensuring that every company that seeks to offer financial and investment services or assets in Japan applies for and gets accreditation before being allowed to roll out its services.

The publication of the draft report, which has attracted a lot of attention in recent weeks, is being viewed as the clearest indication that Japan is taking a definitive stance on the issue of cryptocurrencies and related services.

Fundamentally, the FSA’s report acknowledges that technological innovation is continually changing; a fact that it says means there is a need to ensure collaboration between regulatory bodies.

As a result, the agency hopes to bring on board qualified contributors whose input on self-regulation would help the regulation process develop a functional tool that won’t cripple the crypto industry.

Notable is the FSA’s move in October, which resulted in the accreditation of the Japan Digital Foreign Money Trade Affiliation, an aspect the regulator hopes will help inputting self-regulatory laws into the legal framework.

The accreditation of the DFMTA gives it the nod to develop necessary guidelines that can apply to the domestic cryptocurrency exchange market. The guidelines would include measures aimed at preventing aspects like insider trading and money laundering.

FSA’s proposed restrictions

As noted above, the Financial Services Agency also suggests several restrictions, including stringent measures against privacy coin listings, transactions in derivatives and on margin trading.

Regarding ICO regulation, the agency explains in the report that tokens could be subject to given regulations, but that would depend on the specific token’s structure. It added that the initial coin offerings would henceforth be regulated under the country’s Financial Instruments and Exchange Act.

There are also strict guidelines aimed at “deemed dealers,”– those companies that have ‘provisionally’ continued to offer cryptocurrency exchange services while the agency reviewed applications.

Most of these dealers have engaged the consumers via advertisements and calls for sign-ups, even though prospective customers did not know that the companies were not registered.

As such, the report states that “deemed dealers” will not be allowed to increase coins in their portfolios until they acquire approval and are duly registered.

These companies are also restricted from marketing themselves or acquiring new customers before they are fully registered something which they must also disclose to their current customers.

On Friday, the FSA filed a report in which it called for the term “virtual currency” as applied to cryptocurrencies to be changed.

According to the agency’s advisory panel, the use of this term is likely to confuse the public into believing that the asset in question is legal tender in Japan.

(Source: Japan Financial Services Agency)


Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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