Japan’s FSA Won’t Curb Crypto Growth, Wants Appropriately Regulated Growth

Japan’s FSA says it will not curb the growth of cryptos as it wishes to encourage and develop a regulated and healthy industry.

Japan’s Financial Services Agency (FSA), the country’s top financial regulator, has reaffirmed their optimistic outlook towards the nascent crypto industry. FSA commissioner Toshihide Endo told Reuters on Wednesday that the regulatory body was looking to find the optimum balance between protecting consumers and promoting technological innovation.

Endo said,

We have no intention to curb [the crypto industry] excessively. We would like to see it grow under appropriate regulation.

Japan’s Regulatory History

The FSA had adopted a more rigorous stance towards the crypto industry after the massive $534 million hack of Japanese exchange Coincheck in January of this year. On-site inspections were held at many exchanges to assess operational risk with a view towards safeguarding customer investments. The FSA's probe exposed the inadequate maintenance of internal control systems by exchange operators, which resulted in them not being able to keep pace with the growing transactional volume. Several exchanges were forced to suspend operations temporarily while many others were served with business improvement orders.

The Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body, was formed by 16 FSA registered crypto exchanges in the aftermath of the Coincheck hack to help work towards a well-governed and healthy crypto industry. The FSA and other regulatory boards have been adamant about the need for anti-money laundering (AML) measures as well as know-your-customer (KYC) laws for exchanges to minimize risk. In July, the FSA revealed that it was considering regulating cryptocurrencies under the Financial Instruments and Exchange Act (FIEA) instead of the Payment Services Act. This move would classify cryptos as a financial product like stocks instead of electronic money, thereby providing stronger and more robust investor protection. It would also allow the possibility for crypto derivatives such as futures and ETFs. In April, a government-backed study looked to explore best practices to legalize and regulate ICOs.

Land of the Rising Sun

Japan has been perhaps one of the most progressive nations when it comes to its cryptocurrency-friendly outlook. It was a pioneer in adopting Bitcoin as legal tender in April 2017. Japan’s faltering economy clearly necessitates the need for supporting the fin-tech industry. While some countries like China are banning some cryptocurrency activities entirely, most others are still debating how to draw up workable frameworks for regulatory purposes. Meanwhile, the land of the rising sun has, true to its name, risen above other nations and showed the way to deal with this new class of financial assets.

By acknowledging the powerful and disruptive potential of blockchain and cryptos, Japan has been able to adopt an approach of promoting growth under a regulated environment. This regulation, while seemingly stringent at times, is necessary for the sustenance of this new technology as opposed to outright bans. Japan has been the epicenter of many fraudulent scams and hacks since the days of Mt. Gox. It has however managed to stay true to its long-term vision and not let FUD run amok. Credit must go to open-minded lawmakers as well as to the country’s investment giants that have backed the crypto industry. This has, in turn, created widespread retail adoption of cryptocurrencies and led to a growing crypto-based economy. While the world cracks down on cryptocurrencies, Japan operates with a slight distinction. Its harshness is focused towards regulation, not the industry.

In the current market, it may be that sustainable growth and innovation are only possible through a cautious approach. Maybe this phase of cryptocurrencies necessitates more monitoring than growth. Perhaps slow and steady does indeed still win the race.