In the early years of bitcoin where crypto regulation in the asset class became loose, Japan is one of the countries that trade and manage. Mt. Gox, once known as the largest crypto exchange, is the home of early Bitcoin in the Land of the Rising Sun.
But after the 2018 $500 million crypto hack on local crypto exchange Coincheck, the Japanese government is now urging other countries to apply the same type of oversight in crypto to banks.
Japan Wants to Tighten Crypto Regulations
In an interview with Japan TimesMamoru Yanase said the following:
“Crypto is getting big […] iEffective regulatory implementation can be done in the same way that you manage and monitor traditional institutions.
Mamoru Yanase, deputy director general of the Finance Services Agency’s Strategy Development and Management Bureau. Source: Japan Times
One of the triggers for stricter crypto regulation in Japan was the collapse of FTX and fraud allegations against Sam Bankman-Fried, its founder and former CEO.
Yanase also points out the difference when it comes to global regulation of digital assets.
Thanks to Japan’s push for crypto regulation and existing rules that provide some shielding from the FTX crisis, exchange investors will be able to withdraw funds from local subsidiaries starting in February, according to Reuters.
Yanase, who has experience in financial regulation, said that crypto technology itself cannot be blamed for the latest disaster.
“The recent scandals in cryptocurrency show otherwise. Problems with loose governance, lack of regulation and supervision, and relaxed internal controls.
Japan, The Crypto-Friendly Nation
Before the local 2018 crypto hack, Japan already recognized BTC and other similar cryptocurrencies and virtual assets as legal property, according to Sanction Scanner.
The recognition comes under the Payment Services Act (PSA), which is part of the government’s regulatory infrastructure for cryptocurrencies. Crypto exchanges must be registered and adhere to Anti-Money Laundering / Combating the Financing of Terrorism (AML/CFT) policies.
The country’s National Tax Agency has determined that cryptocurrency income is classified as “miscellaneous income” in 2017.
Image: Coinpedia
Japan appears to be relatively crypto-friendly despite calls for stricter crypto regulation. Companies that want to get involved in cryptocurrencies are allowed to register as cryptocurrency exchanges, and the industry is generally off limits.
PSA transformation
Meanwhile, changes have been made to the PSA since the 2018 breach, along with the Financial Instruments and Exchange Act (FIEA).
In May 2020, the rules and regulations regarding crypto regulation were updated as follows:
- The term changes from “virtual currency to” crypto-asset
- Increasing restrictions on crypto user management of virtual money
- Implementation of stricter regulations for crypto derivatives trading
- Cryptocurrency custody service providers are protected under the new PSA 2020 laws and regulations
- Companies that own cryptocurrency derivatives are protected under the new FIEA
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