Operators of “virtual currency” exchanges in Japan will have to register with the country’s main financial regulator after the national parliament’s upper house passed a new law today.
The Japanese Financial Services Agency (FSA) will also have the power to conduct on-site investigations and issue administrative orders, according to a report in the Japan Times.
The enacted bill is a revision to the fund settlement law, which previously did not cover bitcoin or similar virtual currencies. It was spurred by a need to further protect exchange users, many of whom have significant funds at stake.
The bill already passed Japan’s House of Representatives (lower house) in April.
Reactions from Industry
Responses to the new regulations from exchange operators have been positive so far.
BitFlyer CEO Yuzo Kano told Bitcoin.com that although he couldn’t speak for all companies, he believed bitcoin exchanges operating in Japan were already compliant with the new laws.
Kagayaki Kawabata of Coincheck said the laws were anticipated, but had come sooner than many expected:
“We didn’t expect the law will be passed at such a fast pace. Japan’s new laws regulating Japanese bitcoin exchanges were what we expected so there was no surprise. For most of existing exchange operators that already obey the law there should be no hurdles, but for new start-ups it might be more difficult for them to enter the market than before.”
In a statement, industry group the Japan Blockchain Association (JBA) was also optimistic:
“JBA (Japan Blockchain Association) welcomes this new law and would like the thank the efforts of the lawmakers, FSA and related government agencies, and all other involved parties who helped see this bill through.
This bill will clarify the definition of virtual currency, introduce a registration system for exchanges, as well as specify user verification and the separation of management of fiat currency and virtual currency, as a counter-measure to money laundering and terrorist financing and to ensure reliability for users.”
Laws to Clarify Status
The new laws, which should go into effect within a year, also change the legal status of virtual currencies to something with “asset-like values,” which can be transferred digitally and used to make payments.
Uncertainty over Bitcoin’s legal status as an asset led in part to the confusion surrounding the Mt Gox collapse in February 2014 – and how to deal with CEO Mark Karpeles.
Investigations into exactly what happened at Mt Gox are still ongoing more than two years later. No funds have yet been returned to users from either Mt Gox’s bitcoin or fiat currency reserves, and the chances of recovering over 800,000 BTC from whoever stole them are slim.
Regulatory Approach to Make Japan a Leader
While Japanese officials were rumored to be unhappy with the negative attention Japan received from the Gox media storm, the government chose not to discourage use of virtual currencies but to study them in greater depth.
This, in addition to formation of industry groups like JADA and its replacement JBA has triggered large new investments and development activity. The country is now positioning itself to be a world leader in developing blockchain-based technologies.
The new laws covering conduct at virtual currency exchanges come amidst other amendments to ease restrictions on Japanese banks investing in non-financial businesses. This will make it easier for them to acquire information technology and other fintech companies.
Images courtesy of Wikimedia Commons