Not every investor has the same level of understanding about the wildly fluctuating cryptocurrency market. While the law of the jungle states that it should be every investor for himself when it comes to guarding his own money, Japan wants to protect cryptocurrency investors who may not be as well versed as their peers by imposing stricter regulations aimed at mitigating the risks posed by speculative crypto investments.
FSA’s Stricter Regulations
Since January’s Coincheck hack, which is also known as the world’s largest crypto heist after hackers stole $530 million in digital currencies, Japan has been keeping a close eye on the crypto market and are actively trying to find potential problems before they happen.
In a recent move, the nation’s financial watchdog Financial Services Agency (FSA) announced that it will be imposing stricter regulations as a countermeasure against the potential risks in crypto speculations, according to a JapanTimes report.
While the report did not specify the details on what the changes might cover, it seems that FSA is trying to protect young investors who may not have a lot of experience yet when it comes to speculative investing in the crypto market. An unnamed official from one of the country’s crypto exchanges was quoted as saying:
“Young users who had previously no connection (with cryptocurrencies) have increased at a breathless pace.”
FSA is well aware that contrary to cryptocurrencies’ originally envisioned function as an alternative payment method, these days they are now used as a vehicle for speculative investments. The agency’s aim is to come up with a minimum legal framework that will address potential issues that may arise in crypto’s use as an investment and “prevent a situation in which there is no law governing (cryptocurrencies) when they come into wide use,” as stated by one of its officials.
The Appeal of Speculation
Speculating in any market, whether in stocks, foreign exchange or cryptos, can be a very profitable move if speculative investors are able to correctly gauge the market’s movement. One can actually earn a fortune overnight through speculations, such as the case of investor George Soros, who is known as the man who earned a billion in one day by short selling the British pound.
With this massive opportunity, speculation also comes with an equally massive risk that might be overlooked by some investors. There is always that possibility that one might also lose an entire fortune in a single day, thanks to the highly volatile cryptocurrency prices.
While the report did not reveal the specifics on what FSA plans to do, it appears that it might have something to do with how Japanese law will view cryptos, which could touch on issues such as anti-insider trading.
An unnamed crypto expert told Japan Times:
“Virtual currencies should be positioned as assets for investment, while a legal system to protect investors needs to be established as a matter of urgency.”