By
Mayowa Adebajo
March 12th, 2024
The Financial Services Agency is planning to register all exchanges and companies dealing with virtual currencies for better control.
Japan is looking to treat virtual and conventional currencies equally. Japanese financial regulators believe that handling cryptocurrencies as methods of payment equivalent to traditional ones will strengthen consumer protection and spur growth in the virtual economy.
Nikkei reports that the Financial Services Agency is preparing legislative revisions aimed at recognition of bitcoins and other virtual currencies as fulfilling the functions of currency. The changes will be submitted during the current ordinary Diet session, with the goal of passage before the term ends.
The Financial Services Agency underlines that although virtual currencies are considered as objects, they still lose to conventional ones. The agency offers an action-oriented proposal to develop the financial technology sector.
Cryptocurrencies must serve as a medium of exchange, meaning that they should be used for goods and services purchase. Besides, they must also be exchangeable for legal tender through purchases or trades with an unspecified partner.
To fulfil better control over the virtual economy, the Financial Services Agency will oblige every exchange or institution dealing with virtual currencies to undergo compulsory registration. This is essential to avoid such mistakes as Mt. Gox’ collapse in 2014.
As a reminder, in 2014 Mt. Gox announced that it had been attacked by hackers who had stolen 650,000 bitcoins. However, the police investigated later that most or all of the missing bitcoins had not been held by the exchange when it collapsed. Mark Karpeles, CEO at Mt. Gox, was arrested for increasing his account for more than $1 million in bitcoin in total.
Later one more charge was brought against former CEO during the investigation. Karpeles was accused of embezzling about ¥1.1 billion ($8.9 million) from customer deposits and transferring them to the accounts of his other companies.
The Mt. Gox exchange saw its best time when it handled around 80% of world’s bitcoin transactions. So its epic fail damaged the reputation of bitcoin as reliable currency. Creating a legal framework will allow virtual currencies to spread more safely.
Nowadays there are more than 600 virtual currencies with bitcoin being one of the most popular. Last November bitcoin had a market capitalization of more than 700 billion yen (currently $6.24 billion).
Cryptocurrencies have great potential both as investment targets and low-cost methods of payment. Monetary authorities worldwide are setting out to regulate the technology, starting with measures to prevent money laundering and other illicit activity.
Future regulation of virtual currencies by the Financial Services Agency is not the only news that has come from Japan. According to the joint official press release, ORIX Corporation, ORIX Bank Corporation, Shizuoka Bank, NTT DATA Corporation, and NTT DOCOMO Ventures have partnered to work on the development of new financial services using blockchain technology. The companies announced the intention to build a prototype system using blockchain and conduct proof-of-concept testing. They are planning to attract more partners from various industries to investigate blockchain employment in financial and business fields.