Japan to Change How It Regulates Crypto

  • Coincheck hack spurs decision for tighter laws
  • Japan’s crypto exchanges could be governed by Financial Instruments and Exchange Act
  • Law changes will enhance user protections 

The Japanese Financial Services Agency (FSA) is considering changes to the way it regulates cryptocurrency exchanges.

The amendments will mean crypto exchanges will be regulated by the Financial Instruments and Exchange Act (FIEA), instead of the current legal framework, the Payment Services Act. The FIEA obliges securities companies to manage customer funds and securities, such as stocks, separately from corporate assets.

Under the current legislation, cryptocurrencies are legally positioned as the same means of payment as electronic money. Should the FSA start regulating exchanges under the FEIA, crypto will be treated as a financial product. The FIEA move will also open up the possibility of introducing crypto derivatives.

The proposed changes will reportedly enhance user protection and the catalyst for the decision is the need to strengthen the legal framework for exchanges following the 523m NEM hack at Coincheck early this year. Following the hack, the FSA launched investigations into 15 unregistered exchanges, where it found various security and regulatory shortcomings in operations.

Earlier this month, The Japan Virtual Currency Exchange Association, an industry organization established in April, announced a new set of rules prohibiting the handling of anonymous virtual currency and proposed voluntary regulations based on the protection of customer assets.

U.S. Treasury Secretary Steve Mnuchin 'Fine' With Launch of Facebook’s Libra

The secretary of the U.S. Treasury, Steve Mnuchin, has revealed he is “fine” with the launch of the Facebook-led cryptocurrency Libra, as long as the project follows strict financial rules.

According to a report published by Bloomberg, Mnuchin revealed his thoughts on the Libra cryptocurrency while speaking in a Washington, D.C. hearing of the House Financial Services Committee, responding to a question from a lawmaker. He was quoted as saying:

I’m fine if Facebook wants to create a digital currency, but they need to be fully compliant. In no way can this be used for terrorist financing.

Since Libra was announced back in June of this year, Mnuchin revealed he has met with Facebook various times to discuss regulatory concerns, something that slowed the cryptocurrency’s pace towards its launch, expected in 2020.

The cryptocurrency is set to be governed by the Libra Association, and is reportedly going to be backed by fiat currencies and short-term U.S. Treasury bonds. Its backing in terms of fiat is set to consist of the European euro (18%), the Japanese yen (14%), the British pound (11%) and the Singaporean dollar (7%).

During the hearing, Mnuchin also addressed the U.S. potentially developing its own digital currency, and noted that both he and Federal Reserve Chairman Jerome Powell don’t see a need for it in the near future. Mnuchin stated:

Powell and I have discussed this – we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency.

The European central bank, according to a report, may launch its own digital currency if cash usage drops and is the private sector fails to create an efficient solution for cross-border payments, which the financial institution deemed too expensive.

Featured image via Unsplash.