Japan introduces draft legislation focusing on lighter regulatory measures for cryptocurrency intermediaries that extend beyond digital exchanges.
The Financial Services Agency (FSA) in Japan has proposed new lightweight legislation aimed at cryptocurrency intermediaries that are not crypto exchanges. This move is a response to the hacking of the Mt Gox cryptocurrency exchange in 2011 and 2014, which took place in the country.
The FSA's proposal is intended to clarify the responsibilities of these intermediaries in the cryptocurrency market. It is a response to the issue of many so-called introducers who do not consider themselves as CAESPs (Crypto Asset Exchange Service Providers), as defined in the 2017 legislation.
The new proposal does not apply to CAESPs as defined in the 2017 legislation. Instead, it is designed for entities that provide access to third-party apps for crypto trading services, even if they switch back to their own app. An example of such an entity could be a games app or self-hosted wallet that provides access to a third-party app for crypto trading services and then switches back to the original app.
The FSA recognizes that it can be onerous for organizations that purely act as introducers and never touch any money. In many cases, the FSA might consider the app operator as acting as an intermediary and hence needing to register as a crypto exchange.
The proposed legislation is expected to have implications for various types of apps and services that provide access to cryptocurrency trading. The organization that the Financial Supervisory Authority (BaFin) plans to designate as a new company to be more lightly regulated and act as intermediaries for cryptocurrency (other than crypto exchange platforms) is called a "Financial Services Institution" (Finanzdienstleistungsinstitut) under the amended BRUBEG law framework in Germany.
The FSA presented its ideas to the Financial System Council Working Group on Payment Services last week. The proposal is part of ongoing efforts to ensure the security and integrity of the cryptocurrency market in Japan. The country introduced legislation for CAESPs in 2017, covering the sale and purchase of crypto, acting as a broker, managing money related to these services, or providing custody.
The FSA also acknowledges that many intermediaries do not operate crypto exchanges and do not consider themselves as CAESPs. The new legislation is aimed at addressing this issue and providing a clearer regulatory framework for these entities. The FSA's proposal is expected to contribute to the overall security and stability of the cryptocurrency market in Japan.
