The Japanese financial services agency (FSA) is considering the regulation of unregistered companies urging investments in cryptocurrencies, according to Cointelegraph Japan on January 8th.
Development is referred to as an attempt to close a loophole in the country's existing regulatory framework, where unregistered companies that raise funds in cryptocurrencies rather than legal currencies remain in a gray area.
This situation exists because these companies do not explicitly fall within the competence of the Japanese law on financial instruments and exchange, which prohibits unregistered companies from raising cash investment funds, but does not mention funds raised in the form of cryptocurrency.
As noted by CT Japan, last autumn the impulse to reconsider the current status of these firms was highlighted when the Tokyo police arrested eight men suspected of handling a pyramid scheme – totaling 7.8 billion of yen ($ 68.4 million) in both cash and cryptocurrency from about 6,000 investors in 44 prefectures, including Tokyo.
At the time of the arrest, the suspects were considered to solicit many investments in cryptocurrency rather than cash in an attempt to circumvent the regulation of their unauthorized transactions.
CT Japan cites a source that reportedly reported to the local Sankei newspaper that the entire operation was limited to funds in cryptocurrency, "there was the possibility that the scheme could not [have been] exposed. "
The revision by the FSA of the current regulatory provisions therefore aims to prevent the repetition of such cases.
As reported earlier, Japan has a chess history with cryptocurrencies, which until now has housed the highest profile cryptographic hackers in the industry – including Monte. Gox in 2014 and Coincheck at the beginning of 2018. Since this last year in particular, the FSA has stepped up the control of commercial practices of cryptographic exchanges and has strengthened the process of selecting candidates for risk for its official operating license for mandatory exchange.
Earlier this month, five additional cryptographic exchanges joined the country's Virtual Currency Exchange Association (JVCEA), a self-regulatory body that was set up in April 2018 in an effort to establish security standards for sector-level investors. Since October of last year, the JVCEA has obtained self-regulatory status from the FSA.
The recent moves by the FSA to clarify the remaining ambiguities regarding the regulation of cryptocurrency include the watchdog's consideration of placing cryptocurrencies in a new legal category called "crypto-assets" in the hope that traders will no longer buy them believing to have legal tender recognized by the government ".
The FSA will also introduce new initial money supply rules (ICOs) to protect investors from fraud, requiring ICO operators to seek registration with the watchdog and developing a new token classification system that would make certain tokens subject to regulation regulation.