Japan’s financial regulator, the Financial Services Agency (FSA), has started discussions around imposing stricter regulations for cryptocurrencies in an effort to provide better protection to Japanese investors.
Back in July, the FSA established a dedicated section as well as a panel of financial experts to help the government oversee digital and decentralized finance. The agency will also be responsible for keeping track of developments in cryptocurrencies and central bank digital currency initiatives, as reported by Jiji Press.
The financial regulator intends to have replaced and imposed the new crypto regulations by mid-2022. With the new regulations in place, the FSA hopes to bring stability to the crypto market while ensuring no damage to the development and innovation within the ecosystem.
The FSA had revised a similar law in 2019 that had effectively mandated crypto exchanges in Japan to implement new features for safeguarding users’ assets. This decision was linked to the hack of Bitpoint, a Japan-based crypto exchange that saw a loss of $32 million.
In addition to the recent hack of Liquid crypto exchange, the FSA further believes that operators in the country are yet to implement sufficient Anti-Money Laundering and price volatility measures.
Earlier this month, the FSA announced that it was going to adopt the Financial Action Task Force’s Travel Rule by 2022, which will require all service providers dealing in cryptocurrencies to share transaction data. The Travel Rule was introduced in 2019 as a preventive measure against money laundering and terrorist financing with cryptocurrencies.
The drive will be supported by the Japanese Virtual Currency Exchange Association “to establish a necessary system” to accurately implement that travel rule.