The Japanese Financial Services Agency (FSA) is considering new regulations for cryptocurrency brokerages for facilitating businesses and safe customer experience.
At present, any entity involved in crypto transactions is subject to the same regulations as full-fledged exchanges, even when they only perform intermediary services. The FSA recognizes that this can obstruct innovation and be an unnecessarily hindrance for safe business providers to enter the market.
Japan’s Lighter Regulations for Crypto Brokerage
The proposed “Crypto-asset and Electronic Payment Means Brokerage” category would apply to firms that connect crypto buyers and sellers without holding funds or managing wallets. This would reduce potential for fraud and mismanagement. This would also reduce risks and allow lighter regulations, and thus streamline compliance and boost market entry for new businesses.
Japan’s FSA is considering requiring these brokerages to be affiliated with a parent organization including licensed crypto exchanges or electronic payment institutions. These “parent” organizations would control brokerage activities, provide training, and bear liability for any user harm caused by misconduct. This model encourages strict supervision and careful selection of affiliates.
Alternatively, the FSA may impose service restrictions and mandate financial guarantees, such as security deposits or insurance, to cover potential losses.
This alternative model would thus involve: 1.Service Restrictions: Limiting the types of services the brokerage can offer; 2. Financial Guarantees: Requiring the brokerage to provide a security deposit, a surety bond, or professional liability insurance to compensate users in case of losses. Overall, the FSA is stepping up its efforts with a goal to foster innovation, prevent bad agents all the while without burdening firms with heavy regulations.
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