The Financial Services Agency of Japan (FSA) has initiated discussions on tightening cryptocurrency regulations to protect Japanese investors better. The new regulation will attempt to improve investor protection in Japan.
The FSA established a dedicated section and a council of financial experts earlier this year to help the government manage decentralized and digital financial services. According to Jiji Press, the organization would also be in charge of monitoring advancements in cryptocurrencies and central bank digital currency (CBDC) efforts.
The banking regulator plans to revise and apply the new crypto regulations by the middle of 2022. The FSA anticipates that the new laws will stabilize the crypto sector while protecting innovation and development in the ecosystem.
Strict Regulation of the Cryptocurrency Industry
In 2019, the FSA revised a similar rule, mandating crypto exchanges in Japan to provide extra measures for user asset safety. This decision was taken in response to the $32 million loss experienced by Bitpoint, a Japanese bitcoin exchange.
Apart from the recent Liquid cryptocurrency exchange hack, the FSA believes that operators in the country have failed to implement appropriate anti-money laundering and price volatility measures.
In July, Japan’s Ministry of Finance was contemplating increasing its staff to oversee digital currencies better and that a budget request will be filed in August. In addition, the Bank of Japan (BoJ) has expanded its efforts to create a digital yen that may be used as a substitute for cryptocurrencies.
In March, the Apex bank convened a committee of financial agencies and key banking and finance players to offer comments on the digital yen. These steps were taken to ensure that the Asian country could stay up with the rapidly evolving world of cryptocurrency law.
The FSA also said earlier this month that, by 2022, it would apply the FATF’s Travel Rule, which will require all bitcoin service providers to report transaction data. The Travel Rule was enacted in 2019 as a preventative measure against money laundering and terrorist financing using cryptocurrencies.
The Japanese Virtual Currency Exchange Association will back the effort to “create a required framework” for appropriately enforcing travel regulation.