Japanese Regulators Introduce New Measures To Protect Consumers
Japan has long been at the forefront of the cryptocurrency/blockchain industry, with innovators and forward-thinkers within the country quickly adopting and developing crypto assets and similar technologies. And although many Japanese citizens see eye-to-eye with cryptocurrencies, regulatory bodies across the country have taken a cautious stance, doing their best to protect consumers from scams, hacks and the like.
As per a report from The Japan Times, a Tokyo-based publication, the country’s Financial Services Agency (FSA) has recently clamped down on one of the most important aspects of this industry — exchanges.
The FSA, which is essentially the Japanese equivalent of the US’ SEC, has tightened the registration process for upcoming crypto exchanges, insiders tell The Japan Times. More specifically, the regulatory body is doing its best to ensure that said exchanges are utilizing the proper risk management and mitigation techniques, methods, and systems. The revised registration screening rules are reportedly an update to Japan’s Payment Services Act, which was instated in April 2017 to protect the average cryptocurrency consumer from financial risk.
Those familiar with the matter noted that the revised act will require each crypto exchange license applicant to answer upwards of 400 questions, or a four-fold increase in potential questions. The Japanese news source elaborated, writing:
The state watchdog has increased the number of questions asked when screening applications to about 400 items, up fourfold, sources said Saturday.
Along with the bolstering of the regulatory questionnaire, the FSA added one more hoop for exchanges to jump through, with the revised act now requiring applicants to submit board meeting minutes. It was noted that via the minutes, the regulatory body intends to certify that there are proper measures in place to “sustain the company’s financial health and ensure the security of its computer system.”
The sources later added that this move to garner these minutes is not only to ensure security, but to also confirm that company executives are legitimately involved in the decision-making process of an exchange’s operations.
The updated screening process will also include a regular review of a crypto exchange’s primary shareholders, to “examine if an internal system is in place to check for links to antisocial groups.”
Unfortunately, analysts expect for this new regulatory move to hamper the development of Japan-based exchanges, as the stricter rules may cause the over 100 prospective exchanges to drop their applications ‘tout suite’.
It is clear that the FSA still has the $538M hack of the Japan-based CoinCheck fresh in their minds, as it is apparent that this move, along with a series of recent regulatory restrictions, is directed at mitigating the future risk of hacks and the subsequent loss of consumer-owned funds.
Regardless, as reported by Ethereum World News last week, Toshihide Endo, a commissioner at the FSA, stated:
We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.