The Japan Virtual Currency Exchange Association, a self-regulating body of 16 exchanges, on June 18 announced a plan for a new set of guidelines that are designed to prevent money laundering, insider trading, market manipulation, and to increase know-your-customer (KYC) requirements. The guidelines include penalties for exchange employees who engage in insider trading.
CoinTelegraph Japan reported that the new anti-money laundering guidelines would prohibit exchanges from listing coins designed for high levels of anonymity, such as Zcash and Monero.
Of course, these regulations are not government-mandated and are therefore not required or enforceable by law. However, exchanges who opt not to adopt the guidelines risk damage to their reputations.
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Following Coincheck, Japan’s Regulatory Climate Grows More Intense
The JVCEA was born in April of this year after the $530 million Coincheck hack. Two separate blockchain-oriented entities, the Japan Blockchain Association (JBA) and the Japan Cryptocurrency Business Association (JCBA) combined their forces to form the entity. The organization’s self-described mission is to inspect the security of Japanese cryptocurrency exchanges and to pave the way forward with regulations specific to crypto-related matters.
The Japanese Financial Services Agency (FSA) also became much more vigilant in its enforcement of laws relevant to exchanges following Coincheck. FSA officers began conducting in-person inspections of exchanges; some exchanges who couldn’t bring their operations up-to-snuff were even forced to close their doors.
Self-Regulating Bodies Appear Increasingly Often as Governments are Slow to Legislate
A global rise in self-regulating bodies has taken place as it has become increasingly clear that many of the world’s governments do not have the necessary knowledge or experience to appropriately regulate the cryptocurrency industry. Laws imposed by uninformed governments are at risk of either stifling industry growth with unnecessarily strict regulations or putting customer safety at risk with regulations that are too lax.
The South Korean Blockchain Association, one such self-regulating body, released its own set of self-regulatory guidelines on Tuesday, April 17; similar to the JVCEA’s guidelines, the framework was designed to prevent money laundering, insider trading, and other illegal activities. Organizations like CryptoUK have released similar industry guidelines earlier this year.