Why Self-Regulation Could be the Solution to Japan’s Hacking Past
There is good news for cryptocurrency industry players in Japan. The country’s Financial Services Agency (FSA) announced that it has given its approval for the industry to regulate itself. This means the industry will now be able to provide guidelines on matters like safeguarding consumer assets and anti-money laundering policies to its 16 registered crypto exchange companies.
The Japan Virtual Currency Exchange Association (JVCEA) will also have power to monitor and sanction exchanges for any violations. The approval comes after the 16 crypto exchange companies formed a united front and drafted an approval to the FSA for self-regulation. Even though the FSA will retain its oversight role on the industry, what could self regulation mean for Japan?
The self-regulation concept contains varied opinions from stakeholders in the cryptocurrency industry. In this case, Japan’s industry will clearly be the winner because there is a combined effort by the FSA and the JVCEA to create a favorable environment that would increase investments for those who see the opportunity.
The JVCEA will focus its efforts on working within regulatory requirements provided in the country while developing guidelines for exchanges to safeguard crypto companies and consumers. Technically, the JVCEA will be in a better position to monitor crypto exchange systems for all companies.
Since the technology is constantly developing, self-regulation will enable the JVCEA to be more active in identifying potential threats and develop solutions to minimize risks for consumers and companies. If these steps are not taken, the consequences of JVCEA not taking all the necessary measures may prove too costly for the industry.
FSA will be able to develop progressive legislations in consultation with the JVCEA to improve the industry’s operating environment. However, the FSA tasks are likely to lessen as the JVCEA is held more responsible.
The self-regulation measures have come at a time when both cryptocurrency exchanges and the FSA have been criticised after Japan was hit by a wave of hacking incidents. But for Qupon’s CEO, Joseph Oreste, it is a wait and see situation.
“We’ll see what happens with JVCEA, The association sprung up as a result of multiple hacks of Japanese exchanges. We’ll see how it interacts with the global crypto community to ensure all exchanges secure their customer data,” he says.
In September this year, Zaif cryptocurrency exchange was hit by hackers who made away with about $60 million worth of digital currencies.
This followed one of the biggest heists where hackers hit Coincheck cryptocurrency exchange earlier in the year and got away with nearly $530 million dollars worth of coins. While the FSA could have developed heavier regulation, credit needs to be given to all parties involved because such a move would have stifled innovation in the country.
The JVCEA and FSA are hoping that the latest step to allow self regulation will improve investor confidence in the industry after its tainted past. Even so, it remains to be seen whether other governments will follow Japan’s footsteps and make use of already formed groups such as the Virtual Commodity Association (VCA) to improve and strengthen this burgeoning industry.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.