According to reports of January 8, Japan’s FSA (Financial Service Agency) is considering regulating firms which are unregistered and promote cryptocurrency investments. Reports suggest that this development is intended to close loopholes in the countries regulatory framework making sure that any unregistered firm which collects funds in crypto instead of fiat remain in a grey zone.
The reason for such situations in the country is that these unregistered firms do not fall under the watch of Japan’s Financial Instruments and Exchange Act permanently stopping companies which are not registered from collecting investment funds in cash. According to CT Japan, the incentive for reassessing the status of such organisations was nullified when a total of eight people who were suspected of running a pyramid scheme were arrested by Tokyo police. A total of 7.8 billion yen was recovered in the form of cash and cryptocurrency from over 6000 investors.
When being arrested, the suspects were believed to be soliciting investments in cryptos instead of cash in order to bypass regulations of their operations which were unauthorised. One of CT Japan’s Sources reported to Sankei (Local daily news outlet) that if all the actions made were limited to funds in cryptocurrency, ‘there was a possibility that the scheme could not [have been] exposed.’
According to previous reports, Japan has a diversified history when it comes to cryptocurrencies acting as a host to industries highest profile exchange hacks to date which includes Mt.Gox in 2014 and Coincheckin in 2018. The FSA has made it a point to aggravate its checks of crypto exchanges and has protected the method of screening applicants for giving out exchange operating license.
Five crypto exchanges have joined JVCEA (Virtual currency exchange Association), a self-regulatory body responsible for establishing safety standards. JVCEA was formed in April 2018 and has been sanctioned the status of self-regulating by FSA in October 2018. FSA has pulled up its socks in order to regulate cryptocurrencies as the watchdog is now considering including cryptocurrencies in a new and a legally formed category called ‘crypto-assets’.
The report stated ‘hope that traders will no longer purchase them believing that they are legal tender recognised by the government.’ In its pipeline, The FSA has plans of introducing new ICO (Initial Coin Offering) regulations in order to protect investors from getting defrauded. With this project, ICO operators will be required to register under the watchdog.