Japan Gives Green Light To Self-Regulating Crypto Consortium

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After months of uncertainty, Japan’s foremost self-regulating cryptocurrency body unexpectedly received a regulatory stamp of approval on Tuesday.

Crypto Is Now Self-Regulated In Japan

Per a report from Reuters, the Japan Virtual Currency Exchange Association (JVCEA), a collective of the nation’s foremost crypto asset platforms, is now legally permitted to regulate players in this nascent industry.

The approval, which came from Japan’s Financial Services Agency (FSA), will allow the JVCEA to police and punish local exchanges that may be in violation of the body’s regulations, which include limits on margin/leverage cryptocurrency trading.

The self-regulating consortium, which consists of BitFlyer, Tech Bureau, Quoine, and a dozen other startups, will also be responsible for staving off money launders, policing regulatory compliance, and providing operational guidelines for local platforms.

Most importantly, the JVCEA will manage how exchanges safeguard customer-owned crypto assets, which is a pertinent concern to Japanese investors, especially after 2018’s damaging hacks. In the past 12 months, CoinCheck was hacked for $530 million in NEM (XEM), while $60 million in Bitcoin and altcoins was stolen from Tech Bureau-owned Zaif, indicating that the Japanese crypto scene is awaiting proper security protocols and advisories.

Discussing this regulatory green light, an unnamed FSA authority issued the following comment, which was short and to the point:

“It’s a very fast moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do.”

Interestingly, Yuri Suzuki of Astumi & Sakai, a local law company, explained that the self-regulating body’s restrictions are stricter than the laws imposed by the FSA, indicating that local cryptocurrency startups see all-encompassing guidelines as an optimal path forward. The lawyer explained that the consortium’s proposed ruleset may improve the public’s image of the Japanese cryptocurrency scene, which has been beaten to hell and back in recent months.

However, as Suzuki pointed out, the JVCEA may not have an easy time, with the lawyer noting that the workload “is likely to be heavy,” which is only made worse due to the lack of qualified cryptocurrency experts in the Asian nation.

To ease the JVCEA’s growing workload, the FSA has seemingly left one pertinent task to itself, which is the issuance of licenses for potential crypto platforms and exchanges. Alongside the aforementioned green light, the FSA also released a set of guidelines for the 160 prospective licensees.

FSA To Curb Crypto Leverage Trading

In a surprising turn of events, despite the legal recognition that the JVCEA recently garnered, the FSA has revealed that it is considering curbing leverage trading within its jurisdiction to mitigate financial risk for consumers.

Throughout 2017’s monumental bull run, Japanese platforms give traders the opportunity to leverage their cryptocurrency deposits by upwards of 25 times. This high margin limit attracted thousands of traders, with reports indicating that 80% of Japan’s 69 trillion yen ($613 billion) in 2017 were related to leveraged positions.

Under a proposed rule, which is still in the works, platforms that operate in the G7 state will be required to integrate a two times margin cap.

It isn’t clear if this bill will pass, or if JVCEA’s self-regulatory measures will prove to be successful, but many are hopeful that Japan’s move to regulate this industry with fairness and sympathy will be mirrored across the globe.

Title Image Courtesy of Clay Banks through Unsplash

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