Following hacker attacks which left crypto exchanges shorter by millions of dollars earlier this year, Japan intends to nurture growth while ensuring strict regulatory compliance for the cryptocurrency industry.
On Wednesday, Japanese watchdog Financial Services Agency (FSA) stated, it has given the country’s cryptocurrency industry a self-regulatory status. As a result Japan Virtual Currency Exchange Association has been permitted to police and sanction exchanges for any violations.
The approval gives the cryptocurrency industry association rights to set rules to prevent money laundering, safeguard customer assets, and give operational guidelines.
Japan Virtual Currency Exchange Association will look into compliance issues as well.
“It’s a very fast moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do,” said a senior FSA official in a briefing who preferred the cover of anonymity.
“We will make further efforts to build an industry that is trusted by customers,” said the industry association in a statement having received the approval from the FSA.
In 2017, Japan became the first country to regulate cryptocurrency exchanges. All cryptocurrency exchanges have to compulsorily register with the FSA.
In September 2018, following the theft by hackers of $60 million from cryptocurrency firm Tech Bureau Corp, the industry and the regulator came in for some heavy criticism. Before this incident, the company was slapped with two business improvement orders by the FSA following the theft of $530 million in digital coins at Coincheck Inc in January 2018.
FSA officials have the delicate task of clamping down rules and monitoring compliance while balancing it with sufficient space for robust growth.
According to Yuri Suzuki, a senior partner at Atsumi & Sakai, a law firm, the self-regulatory body’s rules are stricter than the current law and she expects them to help the industry to regain public trust.
At the same time, “the self-regulatory body’s workload is likely to be heavy and there is an issue of whether it can secure enough staff with expertise in crypto exchange business,” said Suzuki, who closely follows crypto industry regulation at home and overseas.
The FSA has issued a set of guidelines for those applying to run crypto exchange in Japan. Around 160 organizations have expressed interest in doing so.
Japan already has 16 approved cryptocurrency exchanges.
Since December 2017, the FSA has not granted any new approval.
“We are looking into more details than before. In that sense, the approval process has become more strict,” said the FSA official.