The Financial service Agency (FSA) of Japan has granted the cryptocurrency sector of the country the right to self-regulate. Through the Japan Virtual currency Exchange Association (JVCEA) a coalition of registered cryptocurrency exchange platforms operating in the country, the exchanges will formulate regulations that will govern all cryptocurrencies activities in the country.
The new cryptocurrency regulatory body will be mandated to define exchanges’ operational requirements, come up with consumer protection laws, design anti-money laundering policies, create an efficient employee ethics and enforce the new regulations on all the exchange platforms operating and those seeking to operate in the Japanese land.
The Japanese government unlike other Asian states has been relatively friendly towards cryptocurrencies. Japan is a lucrative cryptocurrency market that has appealed to over 150 digital assets operations.
Big cryptocurrency operations attract big risks in equal measure. Japan’s cryptocurrency industry has taken heaving beatings from hackers. In the first quarter of this year Coincheck, a cryptocurrency exchange platform with operations in Tokyo lost $530 million to hackers. The firm has already rolled out a refund program to the victims of the hack. Eight months later in September another exchange platform, Tech Bureau Corp was set back $60 million through hacking.
Japanese cryptocurrency investors are losing confidence in the industry and it is for this reason that FSA and JVCEA are working to restore the industry’s dignity. Besides the JVCEA’s regulations, the country’s FSA has formulated new regulations for exchanges in which non-compliant entities will be sanctioned by the body. The new regulations prohibit exchanges from keeping user’s coins in hot wallets that are prone to hackings. The regulations recommend an offline custody which is hard to hack.
Also, it is illegal for an exchange through its employees to use customers’ crypto for whatever reasons. This regulation is aimed at barring exchanges from misappropriating customers’ digital assets leading to uncompensated losses.
Exchanges will be required to initiate thorough currency transfer verification tools to ensure that only legit transfers go through. New rules are expected to be created going forward to ensure that cryptocurrency trading in the country is safe.