The Japanese cryptocurrency industry has received the green light from the government to regulate themselves, after having to deal with two big hacks incidents this year. The Financial Services Association made this decision yesterday, accepting that maybe they have been inefficient when dealing with compliance of the rules that they themselves have dictated. Now the regulatory burden will fall upon the Japan Virtual Currency Exchange Association, integrated by all the approved exchanges in the country.
Japanese Cryptocurrency Industry Woes
This has just not been the year for cryptocurrencies in Japan. Despite the fact that regulators have upheld stricter regulations, this has not impacted the security performance of the exchanges. In fact, two important hacks have happened since this set of new measures from the FSA, that have proven to be very inefficient.
In the wake of this, the government and regulators of the Japanese cryptocurrency industry have taken a historic decision. They have granted the industry a self-regulatory status. This means that they will be in charge of making its rules and securing compliance, all under the watchful eye of the government regulators.
Why Self Regulate?
Self-regulation mostly awarded for nascent industries that are difficult to handle by the government. Cryptocurrencies are one of those difficult to handle industries. In this case, the government estimates that experts will be better at handling rules.
The problem with self regulation is that the responsibility for making rules and exerting compliance falls to the same exchanges. But the FSA might be burning its lasts bullets to make a more secure cryptocurrency market.
Now the regulation duties will shift to the Japan Virtual Currency Exchange Association. This is the council that groups all the approved exchanges by the FSA. While the self-imposed rules of the institution are harsh, vigilance and compliance are key.
The New Regulatory Body
While this whole affair is brand new, it is expected that the new regulatory body will draw guidelines soon. We will see in the future if the new approach yields satisfactory results.
The Japanese cryptocurrency industry was one of the first cryptocurrency industries to be regulated. In fact, the FSA had been upholding new and strict regulatory policies to improve security. But these policies made some exchanges to retire from their business position in Japan.
The American exchange Kraken was one of the businesses affected by these measures. They abandoned operations in Japan citing “increased expenses” as the reason. The new rules will have to be very balanced in their approach. Otherwise, it could cause an exodus of cryptocurrency startups to other countries.