Japan’s Financial Services Agency (FSA) Commissioner Junichi Nakajima said he is unsure whether access to cryptocurrencies should be made easier.
“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets,” said Nakajima. At 58, the career bureaucrat and engineering major from the University of Tokyo, became chief of Japan’s financial regulator last month.
Although, Nakajima claims to be open-minded about the potential benefits that cryptocurrencies possess. One example he cites is as a quick and cheap way to send cash. However, currently in Japan, they are mainly being used for speculation and investment, not as a means of transaction. Nakajima also mentioned new challenges, such as more pervasive participation in decentralized finance (DeFi).
Japan’s tight crypto ship
Compared to more crypto-friendly environments in the West, like the US or Switzerland, crypto markets in Japan remain heavily restricted. Nakajima noted that unlike stocks, cryptocurrencies lack any stable backing or intrinsic value. He says this causes their wide swings in price and is why regulators do not allow crypto investment trusts.
Nakajima himself was involved in crafting Japan’s first regulatory framework on crypto assets. This included the registration requirement for exchanges in 2017. However, after a series of incidents since then, things have tightened up further. For instance, in 2018, a massive theft occurred on Tokyo-based exchange Coincheck Inc., revealing lax internal control and customer protection.
However, despite the current regulatory framework on crypto exchanges being effective in customer protection and anti-money laundering, Nakajima revealed that many of the 31 registered exchanges are struggling financially. Meanwhile, Japan’s FSA set up a study group of outside experts in July. In the coming months, it is expected to consider regulatory responses to DeFi.
Crypto fund hesitation
Although not as conservative as Japanese regulators, allowing at least crypto investment trusts, the US Securities and Exchange Commission is also hesitant to enable more streamlined exposure to cryptocurrencies. Despite over a dozen institutions filing for crypto-based exchange-traded funds (ETFs) with the SEC, the American regulator has yet to approve a single one.
Since new SEC Chairman Gary Gensler taught blockchain technology at MIT, many thought that he would be a crypto advocate. If they haven’t been disappointed by his actions so far, they must be now that he has declared that he is “neutral” towards cryptocurrencies. In fact, he is considering a robust cryptocurrency regulatory framework, albeit he believes this will help adoption.
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