Despite its initial statement that the crypto industry should be self-regulatory, Japanese regulators still want to have some control over the industry.

Japan’s Financial Services Agency (FSA) stated that it is developing a pack of regulatory frameworks that would affect cryptocurrency wallets.

The first step in regulating the crypto industry in Japan was to list crypto exchanges in Japan’s FSA to offer buy and sell services. Cryptocurrency wallets, on the other hand, do not exchange services, so their status remained in the grey area until now.

Wallets are an essential part of buying and selling cryptocurrencies, and the Japanese FSA believes they should also undergo regulations.

However, not all wallets will be affected by the regulations – regulations will not apply to hardware and software wallets. The framework would regulate only custodial wallets – held by third-party companies, like wallet services provided by exchanges and online asset storage providers. 

The regulatory framework will be tailored to suit international anti-money laundering standards and anti-terrorism financing. Regulations will be designed to create a framework for dealing with hacks, bankruptcy, and theft. One of the proposed regulatory instruments is a mandatory Know-your-customer (KYC) mechanism.

The regulations are still in the process of creation and information about whether and when the rules will begin to apply is still not present. Japanese FSA showed, however, that regulations are necessary and anyone who goes against them will be forced to close its service in Japan or go illegal.

The regulations could be inclusive of financial statement audits, maintenance of internal control systems, public policies about repaying customers in the event of stolen funds in a hacker attack, and separate management of cryptocurrencies that belong to the service provider and customers. 

Cryptocurrency Regulations Cryptocurrency Japan Crypto wallet wallet Regulations

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