Following the $530 million Coincheck hack that took place in January of this year, the two largest cryptocurrency industry associations have made plans to form a self-regulating body that will work to make the crypto industry safer for investors.
According to Reuters, it is expected that the Japan Blockchain Association and the Japan Cryptocurrency Business Association will merge as soon as April of this year. The leaders of both organizations are set to become the chairman and vice chairman of the new regulatory body.
However, the Japan Cryptocurrency Business Association said in an official statement that nothing has been decided for certain just yet.
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Japan has Always Been a Global Leader in Crypto Regulation, but Coincheck Hack has Revealed a Need for Review
Japan has been on the forefront of cryptocurrency regulation ever since the country passed its Virtual Currency Act in April of 2017. Among other things, the Act gave Bitcoin and Ethereum legal status as legitimate forms of payment and provided a licensing procedure for crypto exchanges.
The licensing procedure involved meeting a series of standards with regards to system risk management, data security, segregation of customer accounts, KYC requirements, and user protection. Exchanges were also required to register with the Japanese Financial Services Agency, or FSA.
Eleven exchanges were granted the first round of Virtual Currency Exchange Licenses by the FSA in September of 201; Coincheck was among them. Many voices in the cryptosphere have pointed out that the Coincheck hack revealed some major shortcomings in the standards imposed by the Virtual Currency Act and the ways in which they are enforced.
Since the Coincheck hack, the Japanese government has also taken steps to tighten up its own regulations on cryptocurrency and crypto exchanges. A report from the Japan Times on February 16 stated that Financial Services Minister Taro Aso has announced plans to conduct in-person inspections of the fifteen exchanges currently undergoing the application process for a license.
It’s unclear how the entity formed by the merging of the Japan Cryptocurrency Business Association and the Japan Blockchain Association will interact with the Japanese government’s regulatory activity. However, if Japan’s rather balanced approach toward crypto regulation is any indication of the future, the government and the new entity could have a lot to learn from each other.