“Crypto Regulation” A Worldwide Concern
Initially, there were few but now there are a whole lot of countries calling upon worldwide regulators to immediately draw crypto guidelines.
The latest addition in these crypto-concerned countries is Japan. The country was among those who had been pro towards cryptocurrencies when the industry came into being.
They provided a welcoming platform to the cryptocurrency industry in the country so they could thrive and progress.
Financial Services Agency (FSA) which is Japan’s financial watchdog has raised a voice in which FSA has drawn the attention of worldwide regulators.
In its appeal, FSA has called upon worldwide regulators, including the regulator of the USA, to arrive at a consensus on crypto regulations.
Japan’s watchdog has proposed that the crypto industry must necessarily be regulated which must be done as is the case with ‘TradFi’.
‘TradFi’ is a term which is a modern term defining the words “traditional finance”
This means that FSA is suggesting that the crypto industry be regulated in accordance with the regulations and guidelines applicable to traditional finance.
Japan’s plea for inviting the attention of global regulators on the subject of digital asset regulation was duly noted by Bloomberg.
Bloomberg quoted on 16th January 2023 that Japanese watchdog’s DG, Mamoru Yanase said that ‘the world needs effective crypto regulation’.
FSA’s Concerns Regarding Trusted Crypto Entities
Yanase advised that to effectively regulate the crypto industry one may need to apply the same principles as are applicable to conventional institutes.
Furthermore, FSA is suggesting adopting strict guidelines for crypto while keeping in mind the recent crash of the FTX exchange.
The FTX crash has almost every regulatory authority in the entire world on its toes. None of the regulators want to take any risks after what happened to the FTX exchange.
The FSA even had the FTX subsidiaries in Japan cease their operations. It has taken all the necessary steps to have the funds of the investors returned as soon as possible.
FSA seems to be concerned with negatives like mega-scale fraud and embezzlement of funds emanating from trusted crypto entities like FTX.
Certainly, FTX’s collapse was a major upset that the industry has seen for the first time in its 13-year-old history.
Not only did FTX crash but it opened gates to a variety of probes including public fraud, embezzlement of funds, non-compliance, corruption, etc.
FTX has now become an example of how desperately the crypto industry needed the regulations but none were there.
Blockchain Technology Is Unblemished
Yanase opined that what has been done cannot be undone but a lesson must be learned from FTX’s failure. He suggested that gaps and ambiguities are still there which can only be addressed through proper and effective regulations.
While commenting on FTX, Yanase also suggested that FTX’s fall was unavoidable and for which only the firm and its management were responsible.
He denied that either blockchain or crypto technology was responsible for the fall. Instead, he claimed that FTX’s failure was due to loopholes in governance, internal administration, and lack of regulatory oversight.
Japan Terms ‘Crypto Regulation’ A Common Goal
Yanase also told that FSA has invited global regulators from the US and Europe to have a round-table discussion on the issue.
He recommended that the issue of crypto regulation must be treated as a ‘common goal’ for every regulator in the world.
FSA’s DG claimed that the required infrastructure is already in place in the shape of TradFi regulation.
He then emphasized that the oversight standards applicable to banks and exchanges must hence be adopted for achieving the common goal.
Prior to Japan’s appeal for crypto regulation, it was the Bank of International Settlements (BIS) that published a report on the issue.
BIS’s report was compiled by its top economists who gave three proposals for crypto regulation.
One of their proposals also suggested that it would be appropriate to govern the crypto industry the same as the traditional financial sector.