The decision occurred during a cryptocurrency study group meeting after the concerns over money laundering and terrorist financing aroused. The agency looked into matters related to the protection of crypto wallet users. These are mainly exposed to cyber attack and infrastructure failures.
FSA has not yet finalized the details of how and when the new regulation would appear as it shapes up. However, the agency also revealed that it would be aligned with the FATF-led international standards for limiting money laundering and terrorism financing laws. In the upcoming time, cryptocurrency exchanges, wallet service providers and ICO companies should register with the FSA to continue their operations in Japan.
As it began with the proposal to regulate crypto wallets, FSA also specified how it may categorize the wallet services as per their predefined standards. The current laws draw a simple line between businesses that are responsible for purchasing and selling of assets, and those that manage and transfer assets to customers.
Presently, the concerned wallet companies are mostly crypto exchanges. These companies hold customers’ assets to themselves to ensure smooth liquidity as they trade. Furthermore, a software or a hardware wallet doesn’t necessarily hold the users’ funds. Instead, these services allow users to have complete benefit of their crypto assets by enabling them to create private keys. Yet they manage payment transfers, which may bring them within the purview of the FSA.
As per the ItMedia, the FSA meeting focuses only on service providers – mainly exchanges and crypto custodian services. As of now, it prefers to keep software wallet developers and hardware wallet manufacturers out of the discussion agenda.
Breach of Privacy
Proper application of the FSA law, which might include the essential wallet services, could also cause these companies to seek identification requirements from their users. Also, the act would specifically consider wallet companies working inside Japan. Users might also end up practicing regulatory arbitrage by downloading wallets from different sources – using VPNs.
At most, it will be up to the crypto users whether they wish to regulate or not. That is the beauty of cryptocurrencies, anyway.
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