Japan is making major moves in the cryptocurrency world, with new legislation aiming to pave the way for a more supportive and secure regulatory backdrop to ensure that consumers are protected from exchange hacks.
The framework, proposed by the Financial Services Agency of Japan (FSA), comes in response to several high-profile attacks earlier in 2018, resulting in the collective loss of over $540 million.
The draft highlights several key issues, including a note requiring exchanges to hold assets “equal to or more than the amount equivalent to the currency and repayment funds.” This mandate will ensure that if an attack does take place, consumers will receive compensation for lost funds.
The proposition also aims to add restrictions to ‘deemed dealers,’ or companies which are awaiting regulatory approval. The new rules would forbid companies stuck in the regulatory limbo from advertising or soliciting with the purpose of acquiring new customers. The draft would also prevent companies from listing new coins. Currently, there are three businesses – Coincheck, Lastroots and Everybody’s Bitcoin – which are poised to be impacted by this regulation.
In addition to the new security measures, the FSA also stressed the importance of working with other companies within the industry to ‘self-regulate,’ encouraging crypto firms to join the Japan Virtual Currency Exchange Association (JVCEA), an accredited collective working to get a handle on the industry from within.
The proposal comes as other notable Japanese lawmakers are pushing for even more supportive regulatory measures, including lower taxes and exemptions for inter-crypto trades.
The Yen Surpasses the USD in Trading Volume
While regulatory speculation has taken much of the limelight in Japan over the past couple of months, trading volume in Japanese yen has been climbing quietly behind the scenes.
As of Monday morning, the yen accounts for 47 percent of the total bitcoin market, beating out the U.S. dollar which maintains approximately 44 percent of the market share.
“It seems that Japan lives months or years ahead of the rest of the world,” explained Michael Ou, CEO of CoolBitX, a mobile cold storage hardware wallet for cryptocurrencies, explained, adding “While news of government intervention makes headlines, private companies in Japan are also working hard to improve the crypto market: here are more than a dozen Japanese cryptocurrency exchanges. With a growing number of Japanese businesses accepting cryptocurrencies as payment, and with many startups in Japan’s thriving tech scene, it’s fair to guess that continued investment will inspire continued innovation.”
The World’s Top Currency
With trade war woes and a stock market crash looming, the U.S. dollar has lost its footing against the yen in recent months.
The climb has been fueled by a strong Japanese economic outlook and inflows of investors betting on the currency as a safe haven asset. Stephen Innes, head of Asia trading, Oanda, explained, “The global equity market rout has been driving sentiment in the currency markets. I don’t see any significant rebound in risk sentiment yet.”
Backed by a strong national currency and supportive regulation, it’s clear to see why Japan is leading the crypto charge.