Japan’s financial regulator, the Financial Services Agency (FSA), has started discussions around imposing stricter regulations for cryptocurrencies in an effort to provide better protection to Japanese investors.
Back in July, the FSA established a dedicated section, as well as a panel of financial experts to help the government oversee digital and decentralized finance. The agency will also be responsible for keeping track of developments in cryptocurrencies and central bank digital currency (CBDC) initiatives, as reported by Jiji Press.
The financial regulator intends to replace and impose the new crypto regulations by mid-2022. With the new regulations in place, the FSA hopes to bring stability to the crypto market while ensuring no damage to the development and innovation within the ecosystem.
FSA had revised a similar law in 2019, which had effectively mandated crypto exchanges within Japan to implement new features for safeguarding the user’s assets. This decision was linked to the hack of Bitpoint, a Japan-based crypto exchange that saw a loss of $32 million.
In addition to the recent hack of Liquid crypto exchange, the FSA further believes that operators within the country are yet to implement sufficient Anti-Money Laundering and price volatility measures.
Earlier this month, the FSA announced that it will adopt the FATF’s Travel Rule by 2022, which will require all service providers dealing in cryptocurrencies to share transaction data. The Travel Rule was introduced in 2019 as a preventive measure against money laundering and terrorist financing with cryptocurrencies.
The drive will be supported by the Japanese Virtual Currency Exchange Association “to establish a necessary system” to accurately implement that travel rule.