Japan’s cryptocurrency industry is presently experiencing a major shakeup after the government introduced new cryptocurrency regulation in the country. This is because the Japanese government has amended the Japan Financial Instruments and Exchange Act and Japan Payment Services Act.
The new regulation which entered into force 1 May 2020 has brought some notable changes, including the regulation of crypto custody service providers and crypto derivatives businesses.
Currently, there are 23 FSA-approved cryptocurrency exchanges in Japan. Any unlicensed crypto trading platform must now comply with the new regulation or exclude Japanese users from their platforms. Indeed, Bitmex, a global cryptocurrency exchange, has restricted access to users who are Japan residents effective from 1 May.
Under the new regulation, cryptocurrency exchanges will not be able to provide cryptocurrency derivative service while also serving as cryptocurrency custody services. Crypto custody service providers will not sell, purchase, or intermediate the sale and purchase of cryptocurrencies and they will fall under the Payment Service Act. On the other hand, cryptocurrency derivative businesses must be licensed under the Financial Instruments and Exchange Act. When a crypto derivatives business also provides crypto custody service, it may be required to register as a cryptocurrency exchange.
Also, to promote and support self-regulation in the Japan crypto industry, the FSA, on 30 April, announced that it has approved self-regulatory organizations (SROs) in the crypto sector: the Japan STO Association and the Japan Virtual and Crypto Assets Exchange Association (JVCEA). These SROs are expected to work closely with the FSA to enforce strict standards on players in the sector.
Proposed by Japan’s top financial regulator, the Financial Services Agency (FSA), the amendments were adopted May last year.