Japan’s financial market watchdog called The Financial Services Agency (FSA) is looking for ways to regulate unregistered companies that offer digital currency investment services. Apparently, it has already made it mandatory for every crypto exchange in the country to obtain a license before operations could be started.
Raising the Alarm
It is worth noting, however, that no license is required for unregistered firms collecting funds in cryptocurrencies. In fact, a good number of businesses in the country are taking advantage of this regulatory loophole.
What is more is that these firms do not come under the purview of the FSA. Why exactly? This is because the Financial Instruments and Exchange Act can only restrict unregistered companies collecting funds in digital currencies and, thus, do not explicitly say anything about gathering cryptos.
Sometime last year, the Tokyo police were able to bust eight individuals on charges of operating a pyramid scheme in Japan. According to the official report, the authorities were successful in collecting a total of 7.8 billion yen ($68.4 million) in both cash and digital assets from about 6,000 investors across 44 prefectures.
As per the report, one of the suspects confirmed that the illegal operation would not have exposed if and only if they confined to funds in digital assets only. As a result, the incident itself raised the alarm in the country, forcing the authorities to revisit the existing laws under which these unregistered companies fall.
Problems With Digital Asset Thefts
Interestingly, Japan is one of the first major economies in the world to make Bitcoin payments legal. And unlike most of the countries, its legal frameworks favor businesses that offer digital assets. But there is a huge catch, though – the country is plagued with the largest crypto thefts.
Take for example the infamous hack of Coincheck, which is deemed the country’s largest crypto exchange. In early 2018, it forced the aforementioned watchdog to revamp its scrutiny of the exchanges’ business model.
This also promoted all Japanese exchanges to gather after the incident made serious consequences. The goal was to create a self-regulatory consortium, which, in one way or another, would include exchanges that hold an operating license as well as exchanges in line to get one.
The FSA, last year, also introduced a draft to regulate initial coin offerings (ICO) in the country by making a proper classification of the digital assets. It seems to appear that Japan is taking matters seriously compared before. It is interesting to see just how much of an impact this action would bring to cryptocurrency services in the country.