Japanese Financial Services Agency (FSA), a watchdog in charge with banks, exchanges, security and insurance companies, might change the legal framework for regulation of cryptocurrency exchanges, turning them into a financial product, the local newspaper The Sankei Shimbun reported.
Currently, platforms that provide crypto trading services are regulated in accordance with the Payment Services Act, which means that Bitcoin is recognized as a legal tender. FSA has mandated cryptocurrency exchanges to obtain a license for operating on the territory of Japan. However, following a series of hack attacks and security breaches, the regulator concluded that existing mechanisms are not sufficient for adequate currency protection.
To remedy the situation, FSA is going to take cryptocurrency exchange sector under the realm of Financial Instruments and Exchange Act (FIEA), which means that the operators will have to comply with the laws applicable to traditional securities firms and stock brokerages. As a consequence, cryptocurrency assets will be regarded as a financial product.
The regulator hopes that the change will make the digital assets industry more transparent and secure as companies will be required to adhere to stricter consumer protection measures and manage customer funds separately from corporate assets. While industry players may consider this development as a new tightening measure, in the long run, FIEA will make it possible to launch cryptocurrency exchange-traded funds (ETFs) and other derivatives.
FSA started considering a different regulatory approach towards digital assets industry following the infamous Tokyo-based Coincheck hack worth $530 million in NEM tokens. The incident urged FSA to initiate onsite inspections and in-depth investigations of local cryptocurrency operators. Many of them were forced to shut down or leave the Japanese market as the regulator has discovered various security shortcomings and regulatory violations.
This article appeared first on Cryptovest
