The new chief of Japan’s Financial Services Agency (FSA) Junichi Nakajima said that the country should first examine the pros and cons of Bitcoin (BTC) and other cryptocurrencies before making it more accessible to the public in an interview with financial news site Bloomberg last August 10.
Nakajima said that BTC and other crypto assets have great advantages to the public such as allowing cheap and fast transactions but most are being used for speculative investments instead. The FSA chief cites cryptocurrencies’ lack of underlying assets and high market volatility as some of the reasons why Japanese regulators do not allow cryptocurrency investment trusts such as Grayscale Investment’s Bitcoin Investment Trust (GBTC) to be publicly available in the country.
As a result, the FSA chief said ‘We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets.’
In addition to the need for establishing clear crypto regulations, Nakajima stated that more challenges are arising due to the increase of decentralized finance (DeFi) companies that offer new kinds of unregulated blockchain-related assets.
Japan currently restricts crypto trading by having exchange sites comply with strict requirements before they can operate due to a hacking incident that occurred in the Tokyo-based crypto exchange Coincheck on January 26, 2018. This circumstance led to the loss of 523 million NEM.
Stricter compliance regulations were placed to improve the protection of users’ data and prevent money laundering, which then caused cryptocurrency exchanges in Japan to be in a ‘rather tough’ business situation, said Nakajima. It was found that 31 registered exchanges are struggling financially, according to a report by Taiwan-based newspaper Taipei Times last August 11.
With the downturn of the crypto industry in Japan, the FSA is now working on a new regulatory framework for crypto exchanges. Junichi Nakajima took part in the creation of the country’s first regulatory framework on cryptocurrency assets, focusing on the registration requirements for exchange sites in 2017 and was recently appointed as the head of the FSA in July.
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