Japan Reveals Expectations for Crypto Industry Self-Regulation
In an exclusive interview with news.Bitcoin.com, Japan’s top financial regulator revealed its expectations for the self-regulation of cryptocurrency exchanges in Japan. The agency has approved a self-regulatory organization, which it is working closely with to ensure compliance. All 16 regulated crypto exchanges in Japan are members of this self-regulatory organization.
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Japan’s Financial Services Agency (JFSA), the country’s top financial regulator, has granted the Japan Virtual Currency Exchange Association (Jvcea) self-regulatory organization (SRO) status under the Payment Services Act.
The JFSA explained to news.Bitcoin.com that it believes “the SRO can take actions flexibly to keep up with the fast-changing environment surrounding crypto-assets,” adding:
We think it necessary [for us] to work with the Jvcea closely so that the association can successfully perform self-regulatory functions through the establishment and application of self-regulatory rules and monitoring of their members.
The association is expected to cooperate with the JFSA to instruct and supervise its members to “operate their businesses appropriately.” It is also expected to work with them “to improve the safety of related systems through investigation and research on security” and disseminate “information externally to increase the awareness of exchange users,” the agency described.
Furthermore, the association is expected to “set out detailed wallet management processes from the system security point of view and the cross-sectoral rules in areas that are not covered by the laws/regulations, for example, margin trading, for the users’ protection,” Japan’s top financial regulator noted, elaborating:
We expect that through self-regulation, clearer and more detailed rules will be provided as to provisions that are not specified under the existing laws/regulations, as well as self-discipline in areas that are not covered by the laws and regulations.
Adhering to Self-Regulatory Rules
All of Japan’s 16 registered cryptocurrency exchanges are members of the Jvcea. Initially, only registered exchanges could join the association. However, after it was granted SRO status, the association opened up membership to other cryptocurrency operators. According to local media, deemed dealers, which are companies that have been allowed to operate while their applications are being reviewed by the JFSA, can also join the association.
The JFSA confirmed to news.Bitcoin.com that “It is not a legal obligation for virtual currency exchange service providers to be a member” of a self-regulatory organization. “However, from the perspective of user protection, the JFSA monitors whether virtual currency exchange service providers conduct their businesses appropriately, taking self-regulatory rules into account.” In other words, crypto exchanges are expected to uphold self-regulatory standards even if they are not members of the Jvcea.
The agency further revealed that it “works closely with the association by exchanging views about various issues on a regular basis and sharing information on members, unregistered business providers and user complaints,” emphasizing:
In cooperation with the Jvcea, the JFSA has been monitoring virtual currency exchange service providers as to their compliance with self-regulation as well as the laws and regulations.
In terms of whether the JFSA will approve another self-regulatory organization, the agency noted that “There is no limit to the number of SROs under the laws/regulations.” The regulator added, “In the event that another SRO submits an application for approval, the JFSA will scrutinize it from the viewpoint of the applicant’s effectiveness in performing self-regulatory functions.”
What do you think of Japan’s approach to self-regulation for the crypto industry? Let us know in the comments section below.
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