Japanese financial regulator the Financial Services Agency (FSA) is considering to change the legal basis for how it regulates cryptocurrency exchanges, local media Sankei reports July 3.
The FSA reportedly is considering to regulate crypto exchanges by the Financial Instruments and Exchange Act (FIEA), instead of its current legal foundation, the Payment Services Act. According to Senkai, this means that the exchanges will have stronger customer protections. The FIEA obliges securities companies to manage customer funds and securities, such as stocks, separately from corporate assets.
Under the current legislation, cryptocurrencies are legally positioned as the same means of payment as electronic money. Should the FSA start regulating exchanges under the FEIA, crypto will be treated as a financial product. The FIEA will also open up the possibility of introducing crypto derivatives like exchange traded funds(ETF).
Sankei writes that the 523 million NEM hack at Coincheck early this year contributed to the FSA considering a different legal foundation for crypto exchanges. Following the hack, the FSA launched investigationsinto 15 unregistered exchanges, where it found a variety of security and regulatory shortcomings in the exchanges’ business operations.
Earlier this month, the Virtual Currency Exchange Association (JVCEA) announced a new set of voluntary rules. The self-regulatory exchange body aims to better align with existing anti-money laundering(AML) regulations, and will also prohibit the trading of anonymity-based cryptocurrencies like Monero and Zcash.