Japan is inching towards new cryptocurrency regulations.
The Financial Services Agency published its draft report on the upcoming regulations on Friday last week, highlighting several key issues that have not been addressed by current regulations.
This includes deemed dealers, margin trading, privacy coins, and hacking issues.
Moving Forward to Robust Regulations
The draft was discussed at the 11th study group meeting of the FSA and included recommendations from the past ten study group meetings.
The local media suggests that the draft did not meet any major objections and the FSA is expected to create regulations based on this document.
The report takes into account hacking incidents as well as the fact the country was rattled by two high-profile hacks this year- Coincheck and Zaif.
According to the report, cryptocurrency exchanges will be required to improve the “management and maintenance of customer property,” including the management of private keys.
The exchanges should also have net assets “equal to or more than the amount equivalent to the currency and repayment funds” if they get hacked.
It also includes some measures to prevent exchanges from going bankrupt.
What Else Does the FSA Talk About?
The agency also focuses on collaborations with self-regulatory organizations in the space.
The regulator said that it wants the members to join these associations and create systems that work according to their rules.
The regulator provided accreditation to the Japan Virtual Currency Exchange Association in October, to ensure self-regulation can be legally enforced on members.
The FSA could refuse or cancel the registration of operators that neither join an accredited association to conform to self-regulation nor create internal systems for self-regulation compliance.
The draft also focused on “deemed dealers,” i.e., the companies that have been allowed to work as exchanges while their application is under review.
The regulator has also introduced several measures for these operators.
The draft also suggests ICOs to be subject to securities regulation and introducing a registration system for custody businesses.