The Japanese Financial Services Agency (JFSA) has released a draft of its new crypto framework and regulation, which covers all aspects of crypto operations and ICOs. Japan has been rocked by several huge hacks on its crypto exchanges this year and it’s only just starting to recover. These new regulations and framework will be instrumental in creating a safer and more regulated crypto industry in the Land of the Rising Sun.
Zaif Sparking Stricter Rules on Exchanges
Under the new framework, exchanges will be required to up their levels of security and auditing to ensure hacking vulnerabilities are drastically reduced. Zaif was hacked earlier this year and lost $60 million of investor funds. Fisco Digital Asset Group (FDAG) ended up buying Zaif and helped give investors their money back. Fortunately, a Japanese bank managed to track a portion of the lost funds, returning it to investors. Zaif has been an inspiration in the planning of these new regulations to ensure that this doesn’t happen again.
Under the new framework and regulations, the JFSA can apply securities regulations to ICOs as it sees fit. This means any ICOs that are borderline STOs will have the appropriate level of regulation applied, making them safer for investors and the Japanese crypto markets as a whole.
Dealers Must Wait
Unfortunately for Coincheck, Lastroots, and Everybody’s Bitcoin, they must wait for regulatory approval before they can continue growing their operations. The draft legislation said that they will be prohibited from listing any new crypto trading pairs and coins until they are fully registered in the eyes of the JFSA. This move was inspired by the hacks at Zaif and the spate of hacks that occurred earlier this year at other exchanges.
Separation of Internal Systems
The new regulations also call for exchanges to separate internal systems, meaning clients funds are held on a separate internal network from company funds. A similar system currently exists in the traditional financial, world where client’s funds are often dealt with on specialized machines on an ultra-private network that very few members have access to. This is designed to reduce the possibilities of hacks and any damage caused by them.
While there is no launch date for these new regulations, we can expect to see them go live in the first half of 2019. Once they are live, the Japanese crypto industry should experience a much-welcomed boom and more ICOs from Japan will be more sought after thanks to their added legitimacy. More countries around the world are finally adopting crypto regulations, but Japan is ahead of the crowd and is already making its first revisions.