Japan’s financial regulator, the Financial Services Agency (FSA) plans is considering changing the legal basis for how it regulates digital currency exchanges, industry website Cointelegraph has reported, citing information from the local press.
According to a Tuesday report from Japanese newspaper Sankei, the FSA is considering whether to regulate platforms offering crypto trading by the Financial Instruments and Exchange Act (FIEA), instead of its current legal basis, the Payment Services Act. This would reportedly result in local exchanges having stronger customer protections. Under the FIEA, securities companies are required to manage customer funds and securities, such as shares, separately from corporate assets.
The change would also mean that cryptocurrencies would be considered as a financial product, rather than the form of payment similar to electronic money that they are currently treated as. The FIEA will also open up the possibility of introducing crypto derivatives like exchange-traded funds (ETFs).
The Sankei report states that this year’s hack at the Coincheck exchange had contributed to the FSA considering changing the legal basis for crypto exchanges. Some $500 million worth of NEM tokens were stolen from the exchange during the hack, which took place in late January. Since then, the financial watchdog has conducted a series of probes into local exchange operators and issued a number of business improvement orders and suspensions.
The latest wave of punitive measures by the FSA came just over ten days ago, as the regulator ordered six registered exchanges - BitFlyer, Quoine, Bitbank, BITPoint, Tech Bureau and BtcBox - to improve their internal-auditing and user-protection systems. Shortly after that, BitFlyer, which is the country’s largest digital currency exchange, said that it had temporarily stopped accepting new customers in order to reexamine the IDs of "certain customers". It also provided a list of improvements that it intends to introduce to its platform, such as user protection, data protection, risk management and new token listing, among others.