Japan Wants Crypto Regulated Like Banks

Japan wants global regulators to regulate the cryptocurrency market like they regulate banks. The country is also calling for strict rules in the crypto market following the collapse of FTX, which was once one of the largest cryptocurrency exchanges.

Japan wants crypto regulates like banks

The regulatory framework for banks in Japan was proposed by the deputy director-general of the Strategy Development and Management Bureau at the Financial Services Agency, Mamoru Yanase. During an interview, Yanase said that regulating crypto should be the same as regulating traditional financial institutions.

Over the past year, a series of negative events have battered the cryptocurrency sector. The bankruptcy of FTX, which was once one of the largest cryptocurrency exchanges, has increased regulatory scrutiny in the sector. FTX was just one among the several crypto firms that collapsed in 2022, leading to significant losses.

The events in the crypto market last year have highlighted the gaps and differences in the global cryptocurrency regulatory framework. The rules created by Japanese regulators are focused on investor protection. The users of the FTX subsidiary in Japan will be able to withdraw their funds from the platform as early as next month.

Yanase noted that the technology behind cryptocurrencies did not cause the recent scandal in the crypto industry. Instead, it was attributed to “loose governance, lax internal controls, and the absence of regulation and supervision.”

The financial market regulator in Japan is already urging other countries, including Europe and the US, to supervise cryptocurrency exchanges in the same way they supervise banks and brokerage platforms. The proposals made by Japan on crypto regulations have been made public through the Financial Stability Board, a global institution focused on regulating the digital asset space.

FTX collapse triggers the need for global crypto regulations

Yanase also said that it could become necessary for countries to come up with a coordinated resolution plan for when large cryptocurrency firms fail. In 2022, some of the largest companies, including FTX, Celsius, Voyager, BlockFi, and Three Arrows Capital, collapsed.

While several crypto firms filed for bankruptcy in 2022, none of the bankruptcy proceedings highlighted a plan to reimburse creditors, mainly retail investors. The need to protect retail investors that have flocked to the crypto industry has become a priority for regulatory bodies.

The US Securities and Exchange Commission (SEC) said it would step up its supervision of crypto firms, and it recently sued Gemini and Genesis over the Gemini Earn product.

The securities regulator of Germany has also advocated for a global regulatory framework that will guarantee financial stability. Other regulators, such as the Singapore central bank, want to prevent retail customers from accessing the cryptocurrency market.

Yanase noted that the ideal regulatory framework for cryptocurrencies must focus on protecting consumers and preventing money laundering. There was also a need to have strong governance in place, auditing, and disclosure mechanisms that will regulate how crypto firms operate.

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