Sixteen registered Japanese digital asset exchanges have joined to form a new body, aimed at voluntary self-regulation and uniform standards across the industry. “Virtual currency” trading has boomed in the world’s third-largest economy over the past year, as major corporate and government attention have taken the technology mainstream.
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‘The Industry Becomes One’
The new body, which hasn’t been officially named yet, was introduced a press conference in Tokyo on Friday afternoon by two of the industry’s most prominent spokespeople: Money Partners representative director Yasunori Okuyama, and bitFlyer CEO Yuzo Kano. Okuyama and Kano will become the chairman and vice chairman of the new body respectively.
“This is a turning point, where the industry becomes one,” said Kano, referring to the various political lobbying groups that have represented businesses over the past few years.
As TechCrunch Japan reported, it aims to be a self-regulating body, accredited by Japanese regulator the Financial Services Agency (FSA). Although it would initially be made up of already-registered exchanges, companies seeking official operating licenses could join in the future, Okuyama said.
The FSA began handing out official licenses to digital asset exchanges in September 2017. They included Money Partners (Zaif), QUOINEX, bitFlyer, Bitbank, GMO Coin, BTCBox, BitTrade and BitPoint. A new law enacted in April 2017 requires “virtual currency exchanges” to obtain the registration in order to continue operating.
Since then, there has been private grumbling from some industry participants that the government was becoming too heavy-handed and obtrusive in its regulation. Exchange users have been made to complete detailed questionnaires about their identities, trading activities, occupations and incomes — under threat of having their accounts frozen for not complying.
Rival Industry Bodies With Similar but Different Agendas
The law’s initial intent was for the industry to self-regulate. However that has also been problematic, with companies fracturing to form rival bodies.
Advocacy group Japan Authority of Digital Asset (JADA) launched as far back as 2014 to lobby for appropriate government regulation in the wake of the Mt. Gox debacle earlier that year. JADA later morphed into the Japan Blockchain Association (JBA) which competed for attention with the Japan Cryptocurrency Business Association (JBCA).
The new body will complement, rather than replace, the two others — which will continue operating with their respective members rather than merging, as reported previously.
Hopes Security Standards Will Improve After Coincheck Hack
The announcement comes just weeks after a major hack at Japanese digital asset exchange Coincheck, which saw a massive $500 million USD worth of NEM tokens disappear from “hot” wallets.
TechCrunch reporter Akio Hoshi asked Kano if self-regulation would be effective at preventing similar hacks in the future. He replied that the Coincheck incident still isn’t completely understood, but measures like multi-sig and cold wallet storage should be implemented by all, as well as adoption of existing security standards like the credit card industry’s PCI DSS.
Other self-regulatory measures would likely concern employee conduct, advertising standards, anti-money laundering and counter-terrorism financing, plus order book and settlement rules.
Cryptocurrency and digital asset trading has boomed in Japan since the start of official regulation last year. JPY is now one of the most-used fiat currencies for crypto trading, and researchers have suggested middle-aged Japanese men are the world’s largest crypto trading demographic.
Will Japan’s new industry group improve standards in the digital asset industry? Let’s hear your thoughts.
Images via Keiichi Hida, Jon Southurst