Japanese financial regulators have called on global regulators to regulate cryptocurrencies in the same way that they regulate banking, advocating for a robust and harmonized regulatory framework within the industry.
Mamoru Yanase, the Deputy Director-General of the Strategy Development and Management Bureau of the Financial Services Agency, believes that the cryptocurrency industry needs to be regulated.
According to Yanase, effective regulation can only be established by following the same processes for regulating and monitoring traditional financial institutions.
These statements from Japan’s financial regulator come in the wake of the collapse of FTX in November and accusations of fraud against Bankman-Fried, which have had a devastating impact on the cryptocurrency market and drawn attention to inconsistencies and discrepancies in the global regulation of digital assets.
Yanase clarified that it wasn’t the crypto technology itself that caused the FTX incident and the subsequent fallout but rather sloppy governance, lax internal controls, and a lack of regulation and supervision.
According to Yanase, Japanese regulators are urging counterparts in the U.S., Europe, and other regions to supervise cryptocurrency exchanges, similar to how banks and brokerages are supervised.
He also stated that nations must insist that cryptocurrency exchanges implement consumer protection measures and that crypto brokerages should have adequate governance, internal controls, audits, and disclosure.
Yanase also suggested that it may be necessary for nations to establish a global dispute resolution system to cooperate when large crypto firms fail.
The focus of debates about global regulatory issues may be on how to maintain uniformity among island states and those regarded as worldwide financial hubs. Yanase also confirmed that withdrawals are expected to resume at the FTX subsidiary in Japan in February.
Japan is considered one of the most crypto-friendly countries in Asia, with no restrictions on owning and investing in cryptocurrencies.
According to Japan’s Payment Services Act, “crypto-assets” are defined as payment methods that are not denominated in fiat currency and can be used to pay unspecified persons.
The Financial Services Agency (FSA) is responsible for supervising crypto asset exchange service providers (CASPs) in Japan. However, the FSA also works closely with two self-regulation entities in the cryptocurrency industry, the Japan Virtual Currency Exchange Association (JVCEA) and the Japan Security Token Offering Association (JSTOA).
The JSTOA focuses on token offerings and other crowdfunding events, while the JVCEA is responsible for creating rules and policies for cryptocurrency exchanges.
Exchange providers in Japan are also subject to the anti-money laundering (AML) regulations outlined in the Act on the Prevention of Transfer of Criminal Proceeds. These regulations are further specified by the Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism, which have been in effect since February 19, 2021.
In other developments in the Japanese crypto industry, Coinbase recently halted operations in Japan as part of its restructuring plan to survive the bear market. However, the company will retain a small number of employees to ensure that customer assets are protected.
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