Japan FSA considers lighter crypto regulations for intermediaries to balance innovation with user safety, aiming to protect users and support businesses.
Japan is considering new, lighter legislation for cryptocurrency intermediaries that are not crypto exchanges. Last week, the Financial Services Agency (FSA) presented its ideas to the Financial System Council Working Group on Payment Services. This move comes at a time when Japan is trying to change its laws to suit the changing face of cryptocurrencies.
Japan has not been passive in the regulation of cryptocurrencies. The country had some problems with the Mt Gox exchange, after which it was hacked in 2011 and 2014. Such occurrences forced Japan to adopt legal measures for regulating crypto asset exchange service providers (CAESPs) in 2017. These regulations apply to trading in the cryptocurrencies, as well as dealing, fund management, and storage. However, not all crypto businesses come under the CAESPs bracket.
The FSA also pointed out that many introducers are not CAESPs. Introducers refer users to the crypto services but these people do not operate an exchange. For example, a gaming application or an application for self-hosted wallet giving access to third-party trading may not consider itself as an exchange. However, the FSA may view it as an exchange and thus it needs to register as one of the crypto exchanges. This can be a burden for entities that do not directly take user funds as it can be seen in the example of Steam.
Japan Moves to Balance Crypto Innovation with User Safety
In response to this, the FSA is contemplating a policy of less regulation. The new rules would include the following: registration of intermediaries with the FSA, clear user information, and advertising rules. In the event of a problem, they may be legally responsible for those harms. This approach is designed to shield the user while at the same time making the rules reasonable for small businesses.
The FSA is also examining how to address potential damages as well. At the moment, other financial intermediaries that are not included in large groups are required to provide security for compensation. In case an intermediary is associated with a crypto exchange, then it becomes the responsibility of the exchange.
In another recent move, the FSA acted against five crypto exchanges. These include Bitget Limited, Kucoin Bitcastle LLC, MEXC Global, Bybit Fintech Limited. The FSA also accused them of practicing without valid registrations. In Japan, legitimate cross-border transactions require filing with both the FSA and the Financial Bureau. This makes sure that they receive different qualities that make sure the users are protected.
Lastly, these steps show Japan’s commitment to balancing innovation with safety. New regulations aim to keep up with industry changes while protecting users.
