Category Archives: Japan’s Financial Services Agency

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Japan’s Financial Services Agency Hits Exchanges with Unexpected Inspections

Amidst a sudden drop in cryptocurrency prices at mid-week, Japan’s Financial Services Agency (FSA) reported that they had carried out a surprise inspection of two Japanese exchanges.

Bitcoin dropped 2.25% to USD 5,409.4 by 12:46 PM ET (04:46 GMT), after rising to a one-month high at USD 5,586.3 in the mid-week. The drop-in prices pushed the crypto market cap down to $176.7 billion after some notable gains over the past week.

The two cryptocurrency exchanges receiving an unscheduled visit from the official regulator, Huobi Japan, and Fisco Digital Asset Group, had no warning and provoked shock waves through Japan’s crypto community. Reuters claimed that the reason cited for the spot checks was related to both exchanges alleged inadequate customer protection and anti-money laundering (AML) safeguards. The news agency reported:

“The FSA conducted detailed checks with a view to administrative setup, considering that there are insufficient points in the management systems of the two companies and their efforts to protect customers.”

Prior to the end of 2018, the FSA received a wave of cryptocurrency license applications from exchanges granting the newly formed Japan Virtual Currency Exchange Association (JVCEA) the power to oversee self-regulation within the cryptocurrency industry. The country’s top financial regulator Toshihide Endo has suggested that the industry needs to grow under “appropriate regulation” and as such won’t need government intervention to further enforce curbs on how exchanges operate within the country.

The FSA has kept a close eye on crypto-related businesses and firms since the collapse of the Mt Gox exchange back in 2014. The agency regulated crypto exchanges by introducing a licensing scheme and conducting inspections of the exchanges for their security and compliance with anti-money laundering laws.

 

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Japan Releases New Draft Crypto Regulations to Safeguard Investors

Japan Releases New Draft Crypto Regulations to Safeguard Investors

Japan’s Financial Services Agency (FSA) responsible for regulation has published a report outlining its proposals for changes to the current rules which govern cryptocurrency exchanges.

The main purpose of the updated rules is primarily aimed at addressing hacking incidents, self-regulation, deemed dealers, privacy coins, and margin trading. The framework, which also targets ICOs, was established after 11 meetings of the FSA study group.

Last month, FSA’s Study Group on Virtual Currency Exchange Industry concluded its tenth meeting. The group classified tokens according to three categories: virtual currencies with no issuers (like Bitcoin), virtual currencies with issuers, and virtual currencies that not only have issuers but also distribute profits.

According to the FSA, no major barriers prevent the new regulation becoming law and the heightened focus on cryptocurrency by the agency is thought to be a result of highly publicized hackings earlier in the year. The new laws are aimed at preventing such incidents by strengthening the management of customer property to safeguard investors.

New regulations will demand that exchanges have net assets “equal to or more than the amount equivalent to the currency and repayment funds” and also outline measures which cryptocurrency exchanges can employ to safeguard against bankruptcy.

Japan has been developing strict measures to safeguard the space since cryptocurrency began to gain huge popularity in the country. In October, industry self-regulators, the Japan Virtual Currency Exchange Association (JVCEA), were approved by the FSA to be officially recognized in its regulatory position.

Under the new regulations, Japan will refuse registration to those companies who neither “join the accredited association and conform to the self-regulation” nor establish self-regulation. There are currently “three deemed dealers” awaiting approval: Coincheck, Lastroots and Everybody’s Bitcoin.

Such companies are not permitted to advertise aggressively and expand their business while waiting for approval, nor are they able to acquire new customers during this period. Deemed dealers are also required to post their registration status on their websites to clarify their trading status for customers and potential clients.

The report also noted that ICOs “can be subject to the securities regulation” under the Financial Instruments and Exchange Act or the Fund Settlement Act.

 

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