japan global crypto regulation

Japan has reportedly urged other countries, including the United States, to regulate cryptocurrency exchanges the same way they regulate banks. A senior FSA official explained that the recent FTX implosion was not caused by crypto, but by “loose governance, lax internal controls, and lack of regulation and oversight.”

Bank-Level Cryptocurrency Regulations

Japan’s top financial regulator, the Financial Services Agency (FSA), has urged global regulators to include cryptocurrency trading at the bank level, Bloomberg reported on Monday. To quote Mamoru Yanase, FSA’s Deputy Director for Strategic Development and Management:

If you want effective regulation, you have to do it the same way you regulate and oversee traditional institutions.

The FSA has called for stronger crypto regulation following the collapse of cryptocurrency exchange FTX and subsequent fraud allegations against its former CEO, Sam Bankman-Fried (SBF). The FTX debacle has dealt a heavy blow to the cryptocurrency industry, highlighting gaps and differences in regulation around the world.

Japan’s strict regulatory framework for crypto assets offers local investors a degree of protection as they are expected to withdraw funds from two Japanese crypto exchanges linked to FTX next month.

Commenting on FTX’s failure, Yanase argued:

It wasn’t crypto itself that caused the latest scandal…it was loose governance, loose internal controls, and a lack of regulation and oversight.

According to Yanase, the FSA has “started urging” its counterparts in the U.S., Europe, and elsewhere to impose the same level of oversight on cryptocurrency exchanges as traditional financial institutions such as banks and brokerage firms.

Yanase pointed out that countries may need to establish transnational resolution mechanisms to coordinate the failure of large crypto companies, and emphasized the importance of achieving regulatory consistency on a global scale.

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FSA officials stressed that countries “need to firmly demand” that cryptocurrency exchanges adopt measures to ensure consumer protection, deter money laundering and implement robust governance, internal controls, audits and disclosures. Regulators should also have the power to take enforcement actions, such as on-site inspections, to ensure cryptocurrency firms are adequately managing clients’ assets, he added.

What do you think about Japan urging other countries to regulate cryptocurrency exchanges like banks? Let us know in the comments below.

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Kevin Helms

Kevin, an Austrian economics student, discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

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