Japan’s financial regulating body is considering revising the existing regulations on local cryptocurrency exchanges. Japanese local news outlet Sankei reported July 3.
According to Sankei, the Financial Service Agency (FSA) is considering to change the legal basis for how it regulates crypto exchanges from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA). This move will require crypto exchanges to adopt stronger customer protections and manage private and institutional assets separately as stipulated by the FIEA.
Under the Payment Service Act, cryptocurrencies are legally considered as electronic money. Should the FSA start regulating exchanges under the FEIA, cryptocurrency will be positioned as a financial product. The move will also open up the possibility of introducing and trading of crypto derivatives like exchange-traded funds (ETF).
The news outlet also mentioned that the 523 million NEM Coin heist (worth approximately $534 mln at that time) at Coincheck on Jan 26, 2018, contributed to the FSA considering a different legal foundation for crypto exchanges.
The Coincheck hack prompted FSA to finally step in and begin a path of steady and stiff regulation on cryptocurrency exchanges across the Country. FSA launched investigations into 15 unregistered crypto exchanges, where it discovered how poorly things were being run.
The Coincheck hack and the financial regulatory authority involvement sparked 16 registered exchanges to form the Japan Virtual Currency Exchange Association (JVCEA). The main aim of JVCEA is to cooperate with each other to produce industry-wide safety standards for crypto investors, as well as the creation of guidelines for Initial Coin Offerings (ICOs).