Japan to tighten regulation of cryptocurrency firms…seeks to mandate 'reporting system'

Japan is pushing a measure to require prior notification from cryptocurrency firms.

On the 10th (local time), The Block reported that a working group under the Financial System Council considered on the 7th measures to strengthen regulation of cryptocurrency custody firms and transaction management service providers. The Financial System Council is an advisory body directly under the Japanese Prime Minister.

What the Financial System Council reviewed is a system that would require custody firms or transaction management service providers to file prior notifications and register with authorities such as the Japan Financial Services Agency (FSA) before providing services to cryptocurrency exchanges. The Block stated, "Under the current (Japanese) regulatory framework, cryptocurrency exchanges bear strict obligations regarding deposit management," and "(however) there are no corresponding regulations for third-party service providers that cooperate with exchanges."

The Japan Financial Services Agency is also considering a plan to require cryptocurrency exchanges to use only registered custody firms and transaction management service providers. Nikkei said this is "a measure to address security vulnerabilities that could lead to asset theft or system failures."

The Japan Financial Services Agency plans to release a report on these regulatory measures soon. Nikkei said, "(The Japan Financial Services Agency) plans to submit an amendment to the Financial Instruments and Exchange Act during next year's Diet session."