Japan’s crypto self-regulation ‘experiment’ not working

According to local government and industry experts, Japan’s self-regulatory “experiments” on the cryptocurrency industry are reported not working as intended.

Since 2018, the self-regulatory body of the Japan Cryptocurrency Exchange Association (JVCEA) has been tasked with developing guidelines for the national cryptocurrency industry. Government agency.

But when I talked to the Financial Times (FT) on July 18th, no name Sources “close to both industry and government” said the current model of cryptographic regulation is declining:

“When Japan decided to experiment with the crypto industry’s self-regulation, many people around the world said it wouldn’t work. Unfortunately, it seems possible at this point.”

The organization was founded in response to a $ 530 million hack on the Coincheck exchange in 2018. This organization is endorsed by the Financial Services Agency (FSA) of Japan and has the authority to pass and enforce the regulatory framework of local cryptocurrency exchanges.

Its members include a long list of top local codenames such as Coincheck, BitFlyer and Rakuten Wallet Co, as well as Japanese subsidiaries of FTX and Coinbase.

In recent months, JVCEA has reportedly removed a significant amount of flaws from the FSA because of the slow pace of regulation.

According to the FT, the FSA has highlighted key issues with JVCEA, including delayed implementation of anti-money laundering (AML) regulations and lack of communication between directors, member operators and their secretariats. increase.

The report also states that the FSA issued a “very strict warning” to JVCEA in December and is proceeding smoothly, “what kind of deliberation the organization is doing, the decision-making process. It’s not clear what it looks like. ” It was why the situation was so and what was the responsibility of the board members. ”

Prime Minister Fumio Kishida also in June Called Speed up the process of approving the list of digital assets at the local crypto exchange, but still to the entity to “keep in mind the need to protect users”.

Another unnamed source close to JVCEA suggested that the organization lacks real knowledge or interest in cryptography.

According to them, the office is mainly made up of retired bankers, brokers and civil servants, and lacks representatives from JVCEA’s list of cryptocurrency member companies.

“That’s why no one really understands blockchain and cryptocurrencies. The overall turmoil shows that it’s not a simple governance issue. The FSA is very angry with management as a whole. Is standing up. ”

JVCEA states that it is currently working on improvements and addressing the organization’s current problems. However, Masao Yanaga, a professor at Meiji University and a board member of JVCEA, also emphasized the lack of resources for the organization to act swiftly.

Yanagiga also suggested that AML regulations would be difficult to implement due to the lack of international agreements on the sharing of customer data between crypto exchanges.

“Exchange operators are worried that even if we create these rules, we will not be able to implement them,” he said.

Related: Japan passes a bill restricting the issuance of stablecoin to banks and trust companies

One area where JVCEA has made slight improvements this year is the digital asset listing criteria. The entity is tasked with evaluating the tokens that the local company will list, but it usually took about six months or more for JVCEA to carry out the screening process.

In March, Cointelegraph made some of the requirements for JVCEA by creating a “green list” of 19 assets that no longer need to be screened, such as Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). Reported that it was relaxed.