Japan's Financial Services Agency (FSA) has put forward a proposal to significantly tighten the regulation of cryptocurrencies in the country. This is linked to the need for creating a safer investment environment for users.
Regulatory Proposals
The FSA report recommends regulating cryptocurrencies under the Financial Instruments and Exchange Act (FIEA), aiming to enhance investor protection and align crypto assets regulation with securities laws. Key issues in crypto investment highlighted in the report include unclear white papers, inaccurate disclosures, unregistered operations, and investment frauds.
> "It may be appropriate to address them (crypto assets) using the mechanisms and enforcement of the Financial Instruments and Exchange Act." (CITE_NA)
Role of Crypto in Japan's Economy
The report also notes that cryptocurrencies are playing an increasingly significant role in Japan's economy, with over 12 million accounts opened at domestic cryptocurrency exchanges and user deposit balances reaching over 5 trillion yen ($33.7 billion). However, it highlighted that more than 80% of individual accounts hold less than $675.
New Rules and Their Implications
According to the FSA, cryptocurrencies are already considered financial instruments under FIEA when used as underlying assets for derivatives. Should the new rules come into effect, they will impose disclosure requirements on crypto issuers regarding public offerings and secondary distributions, which the FSA claims will eliminate information asymmetry between issuers and investors. Additionally, it will regulate intermediation and brokerage for buying and selling, and enforce rules against unfair trading.
The proposed changes to crypto regulation in Japan underscore the growing importance of this sector in the country's economy and the commitment to creating a safe investment environment for all market participants.
