Japan Plans To Update Its Regulatory Framework

Japan’s dominant financial regulator is said to update its regulatory framework for the cryptocurrency sector to control speculative investments.

Back in April 2017, the Financial Service Agency (FSA) made new legislation that looked into the Payment Services Act to consider cryptocurrency as a legal tender. The regulatory decision coincided at a time when a major economy required domestic crypto exchange operators to register and get a license from the authority to run a crypto exchange in Japan.

The regulator required the framework to actively prepare for an increase in cryptocurrency adoption, especially in their adoption in payments and remittances. The FSA shifted to “prevent a situation in which there is no law governing (cryptocurrencies) when they come into wide use,” noted a senior official from the regulatory authority.

Yet, the regulator did not expect adopters investing in cryptocurrencies such as Bitcoin for investments instead of a payment instrument, hence, it is presently looking at altering those regulations to check speculative investments, according to the report released on Wednesday.

The FSA created a panel of experts in April to ‘close the gaps between regulation and actual practice for cryptocurrencies’, according to the report.

For the time being, cryptocurrency exchanges are suggesting self-regulatory standards of their own. The Japan Virtual Currency Exchange Association (JVCEA), is suggesting a 4-to-1 limit on margin trading to limit investors from borrowing only up to four times their original deposit. The move, considered as a way to restrict the risk of losses for investors, is suggested in a market that currently has no restriction on borrowed margin trading. A couple of domestic exchanges offer a leverage limit of 25-to-1, the upper default margin limit for foreign exchange trading.