Where are they now?: Japan, the birthplace of the cryptocurrency trade regulations

Unlike many regions of the world that are slowly starting to exploit the potential of cryptocurrencies and blockchain technology, some countries like Japan they have been involved in crypto-mania since the beginning.

Japan is one of the forerunners of the adoption of blockchain hosting numerous blockchain projects, startups and cryptocurrency exchanges among the thousands of merchants who accept Bitcoin payments in their activity.

Perhaps the most interesting aspect of Japan's history is the self-regulatory powers that its financial watchdog had conferred on a national association of blockchains, although we'll talk a little later.

Crypto-Crisis

The exchange of Japanese cryptocurrency Mt. Gox it was one of the very first of its kind and in 2014 it was the most famous and largest encrypted exchange in the world, managing 70-80 percent of all Bitcoin transactions worldwide.

Notoriously, the disaster has hit February 2014 when the company discovered that it had "lost" over 850,000 bitcoins, a cataclysm for the market and an almost fatal blow to the industry as a whole.

The ongoing saga has led to the arrest of CEO Mark Karpelés with the accusation of fraud and embezzlement and who could now face a term of significant detention. While the event has been unlucky at the moment, the funds are reported to come back to the mountain robbed Gox traders.

In addition, he put the cryptocurrencies on the radar of governments around the world, which despite the decentralized ethos brought by the first users of technology, presented the blockchain industry with a wealth of opportunities.

The results of adversity

Japan's slow and steady approach to industry regulation began in end of 2014 and eventually led to the Japanese financial services agency (FSA) working to change the "Payment Services Act" which came into force on April 1st 2017legalize cryptocurrencies as a form of payment. Although the fate of the initial offerings of coins (OIC) has remained to be seen, a October 2017, it was not clear on what direction the government would take as South Korea is China had banned the ICOs one month before

Months later, the FSA officially moved to recognize eleven companies registered as cryptocurrency exchange operators and approved 17 cryptocurrencies to be traded on the platforms. Furthermore, as part of the change package, the FSA now has the power to authorize a self-regulating body.

In January 2018, the Japan Blockchain Association (JBA), formerly known as the Japan Asset Authority of Digital Asset (JADA), would have strengthened their newly adopted self-regulatory standards in the wake of a hack on one of its members, the exchange of cryptocurrency Coincheck. Unfortunately, competition between national associations, namely the JBA and the Japan Cryptocurrency Business Association (JCBA) was frustrating the FSA as the two would fight for power negotiate a merger.

In the end, they did it beginning of March, formally announcing the merger at a press conference. The group has made further announcements to the achievement of formal agreements and named themselves the Japanese Virtual Exchange Exchange Association (JVCEA).

The arrival of JVCEA was timely at the beginning of that monthand the FSA has received A proposal legalize and regulate the ICO, from the Business Research Group, an entity supported by the government. According to the group, they believe that "ICOs are a revolutionary technology".

Exchange of information

In could The FSA has defined a "Five Points Agenda" for cryptographic exchanges, aimed at strengthening investor protection and preventing money laundering, the mandatory exchange platforms of the FSA to enhance security that includes portfolio storage cold and two-factor authentication (2FA) for transfers.

Secondly, a rigorous know-your-customer (KYC) procedures to further reduce the risk of money laundering. Third, exchanges will manage customer resources separately from company accounts and daily checks of customer accounts to curb manipulation.

Subsequently, the FSA imposed restrictions on cryptocurrencies focused on privacy, which generally guarantee total anonymity to the user. Finally, the FSA required a crystal-clear organizational structure within the company of an exchange platform, with an invitation to separate shareholders from the management team.

Moving a little later in July, the FSA announced the cryptocurrency trade would be processed under the Financial Instruments Act and the exchange (FIEA). The FSA found that the revision of the Payment Services Act was insufficient to prevent or reduce security breaches. As a result, the FSA will solve the industry's problems with the FIEA, which now means that cryptocurrency activities must be treated as a financial product.

Setting for 2019

For August, the JVCEA had applied to the FSA become an "association of companies for the management of certified funds", formalizing the ability of JVCEA to impose self-regulation rules on the crypto-negotiation market. The association presented a 100-page document which, according to them, would allow the FSA to contribute "to the development of the virtual currency industry and to the protection of user interests".

This ambition has come to completion in end of October when the FSA granted self-regulatory status to the JVCEA, which now would strive to manage, monitor and safeguard the cryptocurrency industry in Japan.

December attracted more lines of silver to the industry when the FSA has been reported to produce a "transparent ICO regulatory framework" with consumer protection at the center of the issue. While it remains pending, the FSA has provided further clarification on cryptocurrencies and re-categorized them as "crypto-assets" rather than "virtual currencies" to make it clear to consumers that the government no longer recognizes them as legal tender.

Japan closes the year with radical changes in the regulatory landscape. Having learned many lessons from his two large-scale hacks and other nefarious cryptographic activities, the FSA and Japanese blockchain associations have been proactive in their attempt to create a safe and nascent sector without hindering innovation or industry in general.

In 2019, most of the world's biggest crypto and blockchain players will further lay the groundwork for their future with the nascent sector. These laws and regulations are likely to turn into an industry that, for flexible nations like Japan, should prove generous in the new year.