Japan’s Financial Services agency responded to the sharp increase in cryptocurrency investments by updating its regulatory framework.
In April 2017, Japan revised the Payment Services Act to protect cryptocurrency users by introducing a registration system for dealers who exchange cryptocurrencies with yen and other legal tenders. The revision assumed wider use of cryptocurrencies for payments and remittances.
The massive increase in cryptocurrency investments driven by the sharp increase in value has resulted in the FSA’s move to “prevent a situation in which there is no law governing cryptocurrencies when they come into wide use”, as quoted to the Japan Times by a senior official from the regulatory authority.
Crypto Investment Regulations in Japan
The regulatory agency had failed to see the emergence of cryptocurrency as investment spurred by the skyrocketing prices of cryptocurrencies such as bitcoin which leaped from ¥200,000 to ¥2 million in December of 2017, with its prices currently hovering around the ¥700,000 mark. Hence, the FSA is currently looking into revising their regulations to curb speculative investment as revealed by the report on Wednesday.
To prevent a situation in which there is no law governing cryptocurrency regulations, the agency has devised a minimum necessary legal framework. The FSA is looking to bring the cryptocurrency exchange sector under the umbrella of the Financial Instruments and Exchange Act (FIEA), which will force regulated firms to manage customer funds separately from corporate assets, thereby effectively resulting in more robust investor protection norms.
The Rising Japanese Crypto-ecosystem
Japan is the global leader in the market development of cryptocurrencies — a global buzzword recently. As of Jan 15, the Japanese yen accounts for 56.2 percent of the trade volume of the most popular cryptocurrency – bitcoin, or BTC. The Japanese yen is followed by U.S. dollars at 28.4 percent, while the rest account for 15.4 percent of total trade volume. Chinese yuan used to account for the largest until January 2017 but dropped after the state imposed strict restrictions on cryptocurrency trading.
“Effectively, Japan is the first and only country that has a proper legal system regulating cryptocurrency trading. That’s a big deal. Before the law regulating cryptocurrencies, people worried about what would happen to their money if an exchange were to go bust.” as quoted by Midori Kanemitsu, the chief financial officer of one of Japan’s largest cryptocurrency exchange operator, bitFlyer Inc earlier this year.
With cryptocurrencies currently in the bleeding edge of human innovation, numerous programmers are feverishly working to come up with better technologies which will inevitably push the blockchain sphere towards perfection. By introducing such regulations, Japan has smartly embraced crypto and is proactively taking steps to make crypto secure and accessible to everyone.