On January 16th, Bloomberg published a report in which it disclosed that regulators in Japan are urging other countries to introduce regulations for crypto the same as those that apply to banks.
The Financial Services Agency (FSA) is the regulatory authority in Japan and its strategy bureau’s Deputy Director General, Mamoru Yanase, talked on the topic.
He stated that cryptocurrency had gotten quite big and the only way of implementing effective regulation for the space was to use the same approach used for supervising and regulating traditional institutions.
He also talked about the downfall of the FTX crypto exchange and said that the event had not just occurred because of the existence of crypto.
Instead, he said that poor supervision, lacking internal controls and loose governance had all resulted in the implosion of the company.
Therefore, he said that regulatory authorities in Japan had started calling on their counterparts in other countries, including Europe and the United States, for regulating crypto exchanges in the same thorough manner as used for banking institutions.
He went on to say that Japan had been using its position within the FSB (Financial Stability Board) to advocate for global crypto regulation.
According to Yanase, new measures could be demanded by foreign regulators from the crypto exchanges operating in their jurisdiction.
He also suggested a measure, which was to allow on-site inspections for ensuring that client assets were being managed correctly by companies.
He also said that a multi-national resolution mechanism should also be developed that could be used by countries for cooperating in the event of a failure of a large crypto company.
These suggestions were also put forward likely due to the disaster of FTX, which appears to have mismanaged client funds.
Secondly, its global operations have also made it quite difficult for regulatory authorities to figure out how to resolve the situation.
Even though Japan has seen such calls for crypto regulation, it is still regarded as a generally friendly country for cryptocurrencies.
This is due to the fact that Japan itself does not have a lot of regulations that limit crypto and companies offering crypto-related services can register with the regulatory authority as crypto exchanges.
As a matter of fact, certain areas have seen Japan act more permissively, as it recently announced that foreign stablecoins would no longer be banned in the country.
Moreover, the government of Japan also provides funding to projects aimed at the development of the metaverse and also non-fungible tokens (NFTs).
However, there are a number of crypto companies that have recently opted to reduce or eliminate their presence in the country.
Some of the most prominent names that have done so recently are crypto exchanges Coinbase and Kraken, both of which intend to reduce their presence in Japan.
But, it should be noted that this trend is primarily because of conditions in the crypto market, which is experiencing a downturn, rather than any crypto regulations in Japan.