Self-Regulation: Will it Solve Japan’s Crypto Exchange Hacking Problem?
Japan’s cryptocurrency market has experienced numerous cyber-attacks that have led to loss of billions. With this in mind, Japan has been contemplating lawful cryptocurrency aspects for a while and its Financial Services Agency (FSA) has finally granted the cryptocurrency industry self-regulatory rights.
The Japan Virtual Currency Exchange Association (JVCEA), a platform that brings together 16 crypto-exchanges, will be overseeing the cryptocurrency industry. The FSA gave the alliance authority to regulate the industry, protect assets of customers and provide operating principles. The association will also give clear policies on anti-money laundering and outline appropriate compliance plans for the country’s cryptocurrency exchanges.
"JVCEA sprung up as a result of multiple hacks of Japanese exchanges. We’ll see how this group interacts with the global crypto community to ensure all exchanges can secure their customer data," Joseph Oreste, founder of Qupon notes.
Previously, JVCEA proposed rules to ban trading of certain coins on exchanges when there is suspicion of money laundering and trading, penalizing culprits in conjunction with the FSA. In addition, members are looking into insuring virtual assets through the use of deposits and bonds. It is also working towards outlining measures for gauging ICO tokens. The association has outlined stringent regulations for 'hot wallets' and determined a limit of virtual currencies that an exchange can manage online.
Self-regulation can be seen as an opportunity to assist government in ensuring the crypto market operates in an orderly manner. It is also beneficial because it reduces the cost of creating regulations and implementing them.
By setting up a self-regulatory body, Japan has demonstrated the cryptocurrency industry is taking a step towards safeguarding investors from fraud and cyber-attacks, and preventing scams. The JVCEA recognizes that its effectiveness in monitoring and overseeing processes, will contribute to identifying any problems or abnormalities when they happen.
Because the body of self-regulators outlines the best operational procedures for the industry and comply with the guidelines, it will eliminate uncertainty and boost crypto market confidence by building customers’ trust and focusing on further development of cryptocurrencies.
Most policies and regulations created are specific to the cryptocurrency sector. This will lead to further innovation and at the same time, ensure adaptability to the needs of the market. Also, regulations can be developed for different cryptocurrencies rather than just one.
Further, self-regulation helps the global market by providing companies with the opportunity to interoperate. This will ensure consistency in regulations used globally and ensure that future industry regulations are desirable by providing forums for people and regulators to learn more.
Japan is working towards restoring its reputation in all matters pertaining to blockchain and cryptocurrencies. In future, this move will facilitate growth in the cryptocurrency industry and ensure that experts determine the way forward for this nascent industry.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.