Japan Plans to Change Crypto Exchange Regulations


Japan plans to change crypto exchange regulations, aiming to solidify the level of investor protection. The regulator proposes to regulate the crypto market under the Financial Instruments and Exchange Act.

3 July, AtoZ Markets The financial regulator of Japan, the Financial Services Agency, is reportedly planning to change the legislative guidelines for how it regulates the cryptocurrency exchanges. 

Japan Plans to Change Crypto Exchange Regulations

According to the local media, the FSA is considering to regulate cryptocurrency exchanges by the Financial Instruments and Exchange Act (FIEA). This is instead of the current legal foundation – a Payment Services Act. As per the officials, this means that the exchanges will be able to provide stronger customer protections. 

The FIEA requires securities companies to manage their customers’ funds, including stocks, separately from the corporate assets. Under the current regulations, cryptocurrencies are legally regarded as the same means of payment as electronic money in Japan. In case the FSA will change the regulation to FIEA, cryptocurrency will be treated as a financial product. The FIEA would also provide the possibility of introducing crypto derivatives like exchange-traded funds (ETFs).

JVCEA Crypto Voluntary Rules

The officials have also stated that the recent $530 million NEM Coincheck hack has pushed the FSA to consider different legal foundation for cryptocurrency exchanges. After the hack, the Japanese regulator has launched probes into 15 unregistered exchanges. Reportedly, it has explored a number of security and regulatory flaws in the exchanges’ business operations. 

Furthermore, earlier this month, the Virtual Currency Exchange Association (JVCEA) has published a new set of regulatory voluntary rules. The rules reportedly include a ban on insider trading and penalties for cryptocurrency exchange employees in case they are involved in “inappropriate” trading linked to their privileged knowledge.

In order to comply with anti-money laundering (AML) regulations, the voluntary regulation proposal is also including a ban on the trading of anonymity-oriented cryptocurrencies. These cryptocurrencies include Monero and Zcash.

JVCEA is made up of 16 Japanese crypto exchanges. It is responsible for checking the security of crypto exchanges in Japan. It also is carrying out some other tasks, such as the assessment of tokens issued via Initial Coin Offerings (ICOs).

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