As reported by Japan Times, the country’s Financial Services Agency plans to start surveillance of all virtual currency exchanges operating in Japan from October.
The agency will be observing all exchanges to verify whether customer interests are properly protected and operations are compliant with the required internal processes and systems.
An FSA executive was quoted as saying:
“We pursue both market fostering and regulation enforcement. We aim for sound market development.”
These are encouraging words however and do not hint at any upcoming ban or suspension from Japan, as was the case in China.
Given how virtual currencies have been largely unregulated and private exchanges facilitate trade, it has been difficult to track financing of criminal activity with cryptocurrencies.
With 2017 seeing a huge boom in the crypto market, world governments have been forced to mobilize and seek regulatory frameworks to bring digital currencies under a system of checks and balances.
Earlier this year Japan also passed the Payment Services Act, which requires all exchanges to adhere to AML (Anti Money Laundering) and KYC (Know Your Customer) laws.
A translated excerpt says:
“Virtual currency exchanges will be obligated to check the identities of customers who open accounts, keep transaction records, and notify authorities when a suspicious transaction is recognized.”
China’s ban on cryptocurrencies also resulted in a huge surge in Japan’s exchange market as traders and investors jumped ship, making Japan the largest Bitcoin exchange market in the world.
It is believed that Japan has over 20 private cryptocurrency exchanges and the FSA recently put together a team of 30 officials tasked with scrutinizing their operations.
This special team will be ensuring that all virtual currency exchanges keep customer assets separate from their own and undertake required risk management measures, including security processes to prevent losses.
It appears that the crypto market’s growth will lead to more steps like this being taken by governments around the world, and many believe these may, in turn, help the market grow further by building investor confidence.