Why Is Japan’s Crypto Regulation Process Not Working Out?
- Japan’s crypto regulation body is not turning out the way it should, reports suggest
- The Japan Virtual Currency Exchange Association (JVCEA) is in a crisis as per Financial Times
The Japan Virtual Currency Exchange Association (JVCEA) was established in 2018 for the purpose of regulating crypto in the nation. However, according to a report from the FT, the regulatory body is failing its purpose.
The government gave the regulatory body the power to penalize crypto exchanges and was tasked with forming dynamic policies for the usage of digital assets in the country. However, as per the report, the body is posed with a severe threat that challenges its existence.
“When Japan decided to experiment with self-regulation of the cryptocurrency industry, many people around the world said it would not work. Unfortunately, right now it looks as though they may be correct,”told a person close to the government to FT.
Japan’s Financial Services Agency (FSA), a government agency and an integrated financial regulator, is not happy with the delays that the JVCEA has been facing while establishing anti-money laundering laws (AML) and criticized the organization’s governance.
The minutes viewed by the FSA from a meeting in December 2021 revealed that the JVCEA received an “extremely stern warning” from the financial authority in the Asian country.
The board meeting minutes viewed by the FT also confirmed that the FSA was not “clear what kind of deliberations the body was having, what the decision-making process was, why the situation was the way it was, and what the responsibility of the board members were.”
The lack of communication between the directors of the JVCEA, its secretariat and member operators was also brought up in the meeting, which has caused the poor performance shown by the Japanese crypto industry regulatory body.
JVCEA board member and professor at Meiji University, Masao Yanaga, stated that the FSA has sent a “very strong request” to JVCEA to bring in anti-money laundering rules in Japan. However, Yanaga stated that the authority is taking its time.
“The operators of the exchanges worry that even if we create these rules, they won’t be able to implement them,”said Yanaga.
Furthermore, Yanaga also stated that the employees of the JVCEA are mostly retirees from banks, the government, and other brokerage firms. Hence, they are having trouble with understanding the work and the science behind crypto and DeFi.
“That is why no one there really understands blockchain and cryptocurrencies. The whole mess shows it is not a simple problem of governance. The FSA is very angry about the whole management,”added Yanaga.