The driving question in the crypto world, which no government can agree on and which may be a large factor in preventing mass adoption, is regulation.
How to do it, and to what extent? Who should hold the reins? And so on.
Japan has proved itself ahead of the curve by officially allowing the crypto industry to govern itself.
Rather than authorizing traditional financial regulators, who are often behind trends and fluctuations in the fast-moving crypto world, to oversee crypto exchanges, Japan has turned over this responsibility to the Virtual Currency Exchange Association (JVCEA).
An official from Japan’s Financial Services Agency (FSA) stated:
“It’s a very fast-moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do.”
In a statement released on October 24, 2018, JVCEA stated that it will ensure that crypto operators adhere to all regulations set in place by Japan’s authorities, as well punish wrongdoers who refuse to comply.
What Does This Mean?
The repercussions of this move by Japan’s FSA could be huge.
First of all, it sets a precedent for other countries to let crypto agencies govern themselves, perhaps leading to more appropriate rules and regulations for the industry. While some crypto ideologues may protest, claiming that cryptocurrency was created to evade regulations, a taming of the “Wild Wild West” is ultimately a good thing.
After all, once cryptocurrencies are seen as a safe and law-abiding market, then they will better be able to achieve their full potential of becoming a household means of transaction.
In fact, the CEO of Goldman Sachs-based cryptocurrency startup Circle, Jeremy Allaire, stated in an interview with Reuters:
“Ultimately there needs to be normalization at the G20 level of critical crypto-related regulatory matters.”
Allaire advocates regulations across all aspects of the crypto industry, extending even to private companies creating digital money with their own ICOs.
Meanwhile, the Paris-based Financial Action Task Force (FATF) have made strides in holding the crypto industry to international legal standards. They will be working with global authorities to see that law-abiding crypto exchanges and operators are all fully licensed and regulated, to prevent money laundering and using crypto to fund terrorism.
Japan is famously more understanding towards crypto than some of its neighbors. China, for example, has shut down its exchanges rather than attempt to regulate them. Europe is only beginning to introduce regulations for the crypto market, with France and Switzerland drafting laws on how to deal with ICOs.
While Japan approving crypto self-regulation through their JVCEA is exciting news for many reasons, it also comes with baggage.
At the end of Q2 2018, two vice-presidents of Japan’s JVCEA – Yuzo Kano, CEO of BitFlyer, and Hiroyuki Noriuki, CEO of Bitbank Corporation – resigned from their positions in the organization. These resignations came about after BitFlyer and Bitbank both received regulatory warnings from the FSA.
And although both Kano and Noriuki resigned to bring their own exchanges back to compliance with the law, it still makes for a rocky start to Japan’s new era of self regulation.