The cryptocurrency industry meets yet another stumbling block as Japan moves to tighten its regulations which are concerned with cryptocurrencies.
According to a report, new regulations in Japan pose slight difficulties in the growth and development of cryptocurrencies in Japan amid the coronavirus pandemic which currently threatens the global economy.
A recent report by So & Sato, a Japan-based law firm specializing in crypto and blockchain, outlines some of the aspects of digital currencies including crypto derivatives and tokenized securities.
The report included that local regulations of cryptocurrencies are much stricter when compared to other countries. It also outlines the possibilities of the traditional finance world and international exchange operatives to get involved in the new opportunities that exist.
“The market is highly regulated in Japan. What seems to be a regulatory overkill, at first sight, is likely to help the market to mature in the mid to long term. This will allow more institutional players to enter the market and to increase their stake in the digital asset space.”
This new stricter regulation which generally falls under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA) is said to be effective beginning in May. According to the report by So & Sato, foreign exchange operatives must now take proper accounts of their customer’s funds, which must be separated from their own native cash flow.
Also, cryptocurrency exchanges must now acquire a license to operate through Japan’s Financial Service Agency. Similarly, foreign-based exchanges must also acquire a license to operate both in their home jurisdictions and in Japan.
“To register as a crypto asset exchange [in Japan], companies must meet certain criteria. Local companies must be incorporated as a stock company and have a minimum capital of JPY 10 million. An exchange must further ensure that its net assets do not fall below the amount of users’ funds that are stored in a hot wallet.”