Japanese financial watchdog, FSA, is reportedly discussing tougher regulations for Japan’s crypto asset market. According to local media, the regulator intends to devise measures aimed at ensuring its stability and protection for investors by next summer.
Financial Services Agency Discusses New Crypto Rules in Japan
The Financial Services Agency of Japan (FSA), has started discussions on the possible introduction of stricter regulations for crypto assets, Jiji Press revealed on Tuesday. According to the news agency, the watchdog plans to ensure the new forms of finance are stable without impeding their development. The measures are expected as early as summer of next year.
In July, the agency established a special section to oversee digital and decentralized finance (defi), the report notes. The regulator also assembled a panel of experts to address the issue. The move comes in response to progressing technological innovation in the financial field including cryptocurrencies as well as central bank digital currencies (CBDCs).
In its report on the regulatory debate at the FSA, the Japan Times remarks that Bank of Japan (BOJ) has launched a digital currency experiment although it does not intend to issue one at this stage. Nevertheless, BOJ and other government institutions are paying close attention to the risks digital currencies may introduce to Japan’s financial markets.
Quoted by the newspaper, head of the FSA Junichi Nakajima stated earlier this month that he is open-minded about the potential benefits of cryptocurrencies as a quick and cheap option to send cash. However, he pointed out that in Japan they are mostly used for speculation and investment rather than money transfers. The commissioner also noted that new challenges stem from the growing number of companies involved in the defi sector and elaborated:
We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets.
In 2017, Japan adopted a regulatory framework for the crypto space which introduced registration requirements for digital asset exchanges operating in the country. Following the 2018 Coincheck hack, the rules were tightened for exchange operators in order to adequately address issues with customer protection and user asset management that were revealed by the massive cryptocurrency theft.
Last week, another Japanese exchange, Liquid, suffered a security breach resulting in the loss of significant funds in various digital currencies. Initial reports suggested the hackers stole around $80 million in cryptocurrency, but according to an estimate by blockchain analytics company Elliptic, the total amounts to over $97 million in crypto assets. Liquid operates under a license from Japan’s FSA.