Following China and Korea’s ban on Initial Coin Offerings (ICOs) and China’s ban on cryptocurrency exchanges, Japan’s Financial Services Agency (FSA) revealed a different approach, and announced the approval of 11 cryptocurrency exchanges to operate as regulated entities in the country.
The move follows an amendment to the country’s payment services law, that established bitcoin as a legal payment method in the country, that had cryptocurrency exchanges register with authorities by the end of September. The licensee’s goal is to protect consumers by making sure operating exchanges meet risk management standards, and appropriately manage funds, while preventing money laundering and terrorism financing.
Among the exchanges that are now registered with the Financial Services Agency are Quoine and the country’s leading exchange, BitFlyer. According to Bloomberg, another 17 cryptocurrency exchanges filed applications before the expiry deadline and, as such, are allowed to operate until the Financial Services Agency considers their applications. A total of 12 firms reportedly closed their doors in light of the new regulations.
According to Business Insider, The Journal reported that exchanges are now required to meet certain criteria, including high cybersecurity standards, in order to maintain their licensed status. The report said:
“The rules require exchanges to maintain minimum capital reserve requirements, segregate customer accounts, and employ anti-money-laundering and know-your-customer practices.”
Japan is cementing its position in the cryptocurrency market
The move, amid China’s cryptocurrency crackdown and South Korea’s recent ban on ICOs, is helping Japan cement its position in the cryptocurrency market. Japan’s regulations are unique as the country’s lawmakers have, in the past, admitted that they were partly driven by the collapse of Mt Gox in 2014.
Mt Gox’s collapse led to the loss of millions of dollars in customer funds, and to a notable crash in bitcoin’s price at the time. So much so, some though the cryptocurrency wouldn’t recover. According to the Japan Times, while speaking about the FSA’s role in monitoring exchanges, an executive stated:
“We pursue both market fostering and regulation enforcement. We aim for sound market development.”