The government of Japan envisages Integration of cryptocurrencies into the law on financial instruments and exchange (Fiea), a movement Far from their current classification under the Payment Services Act.
This decision aims to strengthen the protection of investors and to align monitoring of cryptography on securities regulations, although the Advisory Council remains concerned about the potential risks of prolonging this framework too largely.
Japan considers a major change in the regulation of cryptography
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The Financial Services Agency (FSA) presented a proposal during a working group of the Financial System Council on September 2 to regulate cryptocurrencies under the Financial Instruments and Exchange Act (FIEA). Currently, cryptographic assets are governed by the Payment Services Act, but the Agency believes that the displacement of surveillance to the FIEA would better add up their increasing role as investment products.
In the new setting, cryptocurrencies would be classified alongside titles, subjecting transmitters and exchanges to more strict requirements. The FSA argued that stricter rules would dissuade market fault while ensuring transparency for investors. To balance this modification, the provisions of the Payment Services Act would be deleted to avoid the expenses of commercial compliance that overlap.
The agency stressed that the role of the crypto in payment transactions would remain intact even under the securities law. However, companies offering tokens must provide detailed disclosure on price volatility, reliability and associated risks. The FSA will submit a legislative amendment to the ordinary regime session next year.
Skepticism of experts on IEOS
The proposal caused a debate within the meeting. After presentations of industry groups, some members wondered if the integration of cryptocurrencies in the securities regulation was right.
Naoyuki Iwashita, professor at the University of Kyoto and former director of the Institute of Monetary and Economic Studies of the Bank of Japan, noted that primary tokens like Bitcoin and Ethereum may not have significantly, whether they come from the FIEA or the payment services. However, he raised concerns about the extension of the securities framework to all cryptographic assets.
Iwashita focused on initial exchange offers (IEOS) in Japan, citing data from the Japan Crypto Asset Business Association (JCBA). He stressed that almost all national ieos have lost substantial value, some tokens losing more than 90% of their emission price, leaving them “practically worthless”. He declared that the labeling of assets as titles adapted to public investments under the FIEA would be “unthinkable”.
