Japanese Regulator Suggests a Major Restriction on Cryptos
Japan’s Financial Services Agency (FSA) has come out with a proposal that could shake things up in the country’s crypto industry.
A report that was released on Tuesday recommended that cryptocurrencies be regulated under the Financial Instruments and Exchange Act (FIEA) instead of the Payment Services Act.
This change would bring digital assets in line with existing laws that govern securities and derivatives. As a result, regulators will have much tougher enforcement powers.
The FSA indicated that the various problems afflicting the crypto markets – such as unclear white papers, misleading disclosures, investment scams, and security weaknesses of crypto exchanges – are similar to those dealt with under the FIEA.
It may be appropriate for the regulator to deal with them by the mechanisms and enforcement of the Financial Instruments and Exchange Act, the report said.
Crypto Adoption Rising in Japan
Crypto adoption in Japan is growing in spite of concern.
- Domestic crypto exchanges have opened over 12 million accounts so far.
- Customers have put in more than 5 trillion yen ($33.7 billion), almost one account for every ten people.
- Around 70% of holders are middle-income earners, and 86% expect long-term price growth.
- The percentage of Japanese investors holding crypto is 7.3%, which is more than foreign exchange or corporate bonds.
Katsunobu Kato, Japan’s Finance Minister, said that crypto will diversify market forces. He added that digital assets can become a valuable option if there is a secure investment environment.
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What the FIEA Shift Would Mean
If Japan applies the FIEA to the crypto markets, issuers and exchanges will become subject to stricter obligations, including:
- Token issuers must disclose key details during an offering.
- Brokerage and intermediary regulation for crypto trading.
- Rules against market manipulation and unfair trading.
- Get an emergency injunction against their business.
As of 2022 in Japan, cryptocurrencies are considered a financial instrument according to the FIEA. Bringing all digital assets under the ambit of the law would put Japan at par with existing securities, experts said.
The Road Ahead
The FSA has proposed something to the Financial System Council, which is a discussion stage. The Financial System Council is an advisory body to the Financial Services Minister in Japan. The Japanese government will take the final decision on implementing the new rules.
If Japan’s bills are approved, it could set a precedent for the world. Such a precedent will impact how countries see cryptocurrencies.
