Regulators and authorities in Japan have said that the self-regulation “experiment” for the crypto sector in Japan is not working as expected. The “experiment” under review is the Japan Virtual Currency Exchange Association (JVCEA), a self-regulation organization that creates guidelines for the cryptocurrency industry.
Japan’s self-regulatory crypto experiment is failing
The JVCEA has been in operation since 2018. The self-regulatory agency formulates regulations for the cryptocurrency space in Japan. At the time the agency was being created, there were concerns that it was better placed to regulate the cryptocurrency industry than a government agency.
However, a report by the Financial Times said that s source had revealed that industry regulators and the government were concerned that the system was not working. The current fears were expressed in 2018 when the agency was being set up, with several global agencies pointing to the inefficiency of self-regulation.
The JVCEA was established after the Coincheck hack in 2018, where $530 million worth of cryptocurrencies was stolen. The JVCEA is overseen by Japan’s Financial Services Agency (FSA) and is given the authority to approve and enforce regulations governing local cryptocurrency exchanges.
Some of the members of the JVCEA include Coincheck, Rakuten Wallet, and Bitflyer, among other local crypto firms. The subsidiaries of FTX and Coinbase are also members. However, the FSA has constantly accused the agency of being slow in regulating the crypto space.
Japan’s FSA points to the weaknesses of the JVCEA
The report by the Financial Times pointed to several weaknesses of the FSA as a regulatory agency. The FSA said that the JVCEA delayed implementing critical regulations such as anti-money laundering laws. The poor communication between the members also shows there is poor management.
The Financial Times added that in December, the FSA issued the JVCEA with an “extremely stern warning.” The warning asked the JVCEA to streamline its operations as many gaps in crypto regulations were yet to be addressed.
In June, Japan’s Prime Minister, Fumio Kishida, asked the JVCEA to lower the time it took for new digital assets to be listed on local exchanges. While doing this, the agency also needed to protect its users.
Another source added that the JVCEA staff lacked adequate knowledge of cryptocurrencies. It further claimed that the office staff mainly compromised former bankers, brokers, and government employees. It did not have any representatives from the member companies of the JVCEA.
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