A cryptocurrency exchange association has been given the green light by regulators in Japan to become a self-regulating body for the sector.
On Wednesday, the Financial Services Agency (FSA) announced that the Japanese Virtual Currency Exchange Association (JVCEA) has been awarded the status of “certified fund settlement business association,” giving the body legal authority to shape regulation for cryptocurrency exchanges in the country.
The group will also be empowered to take action against any breaches, giving the body effective powers around both creating and enforcing regulations for the sector.
JVCEA has yet to confirm any of its prospective rules, but press reports have suggested these could include a requirement to hold separate deposits and government bonds, in a move designed to provide redress to customers in the event of hacks.
The association was formed in the aftermath of the Coincheck hack, one of the most high profile attacks on cryptocurrency exchanges in recent years, which cost up to $530 million. After the incident, the JVCEA filed an application with the FSA for approval in August, with Wednesday’s ruling finally granting them the legal authority to develop regulation around the sector.
The body is made up of 16 cryptocurrency exchanges, including Zaif—which itself fell victim to a $60 million hack earlier this year. As a result, Zaif had to sign over its business and assets to another company due to a lack of reserves to cover refund claims.
Previous suggestions to emerge from the body include limiting borrowing on margin, as well as developing a regime of regular inspections for cryptocurrency businesses.
Coinciding with the announcement today, the FSA has reported an increase in activity from firms applying for a cryptocurrency exchange license, and that it has updated the application process to take account of the growth in demand.
As a result, the review process has become significantly tighter, including questions about security, reserves and trading leverage ratios.
With the JVCEA now picking up much of the regulatory burden, it remains to be seen how this will shape the legal picture for crypto exchanges in Japan in future.
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