Japan Financial Services Agency (FSA) said the country needs more persuasive rules in order to turn cryptocurrency investing into a more convincing way of trading for its population.
The Agency’s chief, Junichi Nakajima, said he’s unbiased regarding the potential benefits that digital currencies pose. Although cryptocurrencies are perceived as a quick and cheap way to send capital, currently in Japan the asset class is mainly being used for speculation and investment purposes.
He also added that new challenges are coming from the increased creation of companies involved in decentralised finance, commonly known as DeFi.
“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets,” Nakajima said.
He added that, unlike stocks, crypto is not backed by underlying assets and is therefore subject to volatile prices. That’s one of the reasons, he said, the Japanese government does not allow crypto investment trusts, usually seen as the easiest way for the public to gain exposure to the asset class.
In the United States, investors have the possibility to invest in cryptocurrencies in numerous ways. However, Japan remains heavily limited by comparison. The country’s FSA set up a study group of outside experts in July and is expected to consider regulatory responses to DeFi in the coming months.
Japanese government cautious due to hackers’ attacks
Nakajima helped to create Japan’s first regulatory framework on crypto assets, including the registration requirement for exchanges in 2017.
However, after Tokyo-based exchange Coincheck suffered huge coin theft back in 2018, the country had to tighten up its laws. In paricular, laws on internal control and customer protection were amended. The attack itself resulted in the loss of 523 million NEM, worth approximately $534 million.
As a result, several of the 31 registered exchanges are struggling financially with their business situation being “rather tough”.
Major crypto exchanges such as Binance and Bybit are not among Japan’s registered crypto exchanges anymore and the FSA issued a formal warning letter to Bybit in May and Binance in June, accusing them of offering crypto exchange services in the country without registration.
US Securities and Exchange Commission (SEC) Chair Gary Gensler recently stated that regulating crypto exchanges means the government can get a quick handle on digital token trading. Still, he voiced his concerns regarding the new ways people are getting into crypto, such as peer-to-peer lending on DeFi platforms.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.