The Japanese government has stepped up its efforts to regulate cryptocurrencies to tighten control of virtual currency exchange service operators and transactions of such currencies.
Bills to revise the Payment Services Law and the Financial Instruments and Exchange Law were passed into law on Friday after the House of Councillors approved them at a plenary session.
The revised laws are scheduled to take effect within a year. Most virtual currency transactions have been conducted for speculation purposes, and there has been a succession of cases in which cryptocurrencies were leaked.
The government will tighten its monitoring of irregular transactions, hoping that the revised laws will protect customers.
A 34-year-old man living in Saitama prefecture said he is distrustful of cryptocurrencies.
“The conventional system to maintain safety and protect investors is not sufficient. I still can’t use virtual currencies with a sense of security,” he said.
The man started transacting in cryptocurrencies at the end of 2017 when they were drawing a lot of attention and the prices were continuing to rise. Later on, he suffered losses of about two million yen ($18,462) due mainly to a decline in their value.
The Financial Services Agency introduced a registration system for cryptocurrency exchange service operators in April 2017, ahead of other countries.
This gave the impression that the government was giving an official stamp of approval to cryptocurrencies as a new means of payment, which led to the rapid expansion of the market with an increasing number of new entrants.
The term “cryptocurrency” also drew in individual investors. Observers have said that many people started transacting in cryptocurrencies thinking they were the same as the yen, dollar and other legal currencies that carry an air of credibility from the country that issues them.
With the revised Payment Services Law, the government plans to stop using the terms virtual currency or cryptocurrency and integrate them into the catchall term “crypto-assets” for administrative and other procedures, in order to avoid confusion with legal currencies. “Crypto-assets” refers to the storage and management of virtual currencies using cryptography. The government intends to make it clear that crypto-assets are not legal currencies.
With the revised Financial Instruments and Exchange Law, the maximum tradable amounts will be regulated so that they cannot be more than several times the amount of the original investment, in a bid to reduce the risk of loss to investors. The government plans to announce the details of the law’s revision within a year.
Number of operators falling
The government will oblige cryptocurrency exchange service operators to block internet access in order to manage customers’ assets by protecting them from cyber-attacks. These measures will be taken as many operators fail to sufficiently manage customers’ deposits.
Money Forward Inc, which operates a household account app in Tokyo’s Minato ward, announced in April that it has decided to suspend its efforts for an FSA registration as a cryptocurrency exchange operator.
The decision comes as the costs of its system management and other operations significantly increased after the FSA gave a business improvement order and other orders to many operators following a succession of leaking cases.
“Two years ago, it was possible to start a business with hundreds of millions of yen, but now it now takes two to three billion yen to start a business,” a source said.
As of February last year, there were 32 exchange service operators including those allowed by the FSA to conduct business as a special case, but the number had decreased to 20 as of Friday.
The market value of global cryptocurrencies had fallen to about $260 billion as of Friday from its peak of about $800 billion in January last year.
At first, cryptocurrencies attracted attention as a means of payment, but not many people are using the system.
“Even for a common cryptocurrency, the usage amount was less than one per cent of the total sales of all our outlets in one day in a peak period,” said an official of a major electronics retail store. THE YOMIURI SHIMBUN (JAPAN)/ASIA NEWS NETWORK