The Japanese Virtual Currency Exchange Association, known as JVCEA, have applied to become an official self regulatory body in Japan on Monday, according to an announcement made on their website. The association, made up of 16 exchanges in Japan and all registered under the Financial Services Department, have made the move to gain legitimacy by becoming an approved entity of the country. This would become a huge step forward amid the recent changes in the Japanese Crypto Regulations, where local media outlet, Sankei, has reported earlier last month that The Financial Services Agency (FSA) has been looking to regulate crypto exchanges via the Financial Instruments and Exchange Act (FIEA), instead of it’s current legal foundation, the Payment Services Act.
This comes as news to many, as the institution had been formed just earlier this year, after the hack that Coincheck suffered. It was reported that the hack resulted in the loss of $500 million which is termed as one of the most important hacks ever to have occurred in this space. A raid was launched into the 15 unregistered exchanges where investigations reported for a variety of security and regulatory deficiencies in companies’ operations. Nonetheless, the crypto institution has solid foundations to gain a designated status, as they look to cover all aspects related to cryptocurrencies and their working, while also creating a legal framework to protect investors and encourage crypto trading. They are backed by a few of the most powerful men in the crypto world. These include: Taizen Okuyama of Money Partners as chairman and president, Bitflyer CEO Yuzo Kano, and Bitbank president, Noriyuki Hiroeno, as vice chairman. Other important directors are Yoshitaka Kitao and Tomitaka Ishimura.
Japan has been friendly towards cryptocurrencies, especially among neighbors India, Korea and China who have taken a more hostile approach towards virtual assets. In May, Nikkei reported that 331 crypto traders in Japan earned more than $1 million by trading virtual currencies. This proved to be a crucial figure for the Japanese government, because of the 549 individuals that declared non-working profits higher than a million dollars, 331 were related to virtual currency activities. Japan’s stagnated economy has also been reaping benefits from the advanced crypto evolution in the country since 2017. According to a research conducted by Nomura bank, the annual Japanese GDP increased by 0.3% in 2017 which virtually helped the tax authorities to tax the crypto traders and investors up to 55%. The team in charge of the investigation conducted by Yoshuyuki Suimon, explained;
When some assets increase their value, it also means a higher spending from the consumer. This is known as wealth effect.
We measured the wealth effect of unrealized gains in Bitcoin trading by Japanese investors since the beginning of he fiscal year 2017, and we estimate a potential boost in consumer spending of between 23.2 billion and 96 billion yen.
Amidst of all the fortune and positivity, it is still difficult to predict whether JVCEA will be successful in their attempt to gain regulatory status due to the clashing crypto regulations pertinent in the country. In this light, HitBTC, the 8th most important virtual currency exchange in trading volume, suspended services in Japan, earlier this June, amid interventions by the country’s regulatory agency. The Japanese Financial Services Agency (FSA) claimed that the exchange was unauthorized to operate in Japan and people with Japanese IP addresses will have to provide residential information. Certainly, HitBTC leaving the Japanese crypto framework does not serve as a great sign for the crypto health in the region, as the exchange explained:
For the avoidance of any doubt and in accordance with the Japan Payment Services Act, Hitbtc has temporarily suspended providing virtual (crypto) currency exchange services to residents of Japan.
The JVCEA has submitted their application with the Japanese Financial Regulator (FSA) that will allow the institution to operate as a self regulatory body and become a ‘certified fund settlement business association’ if their application is approved. Earlier in the month, the JVCEA announced a new set of voluntary rules to comply with anti money laundering (AML) regulations and also forbade the trading of anonymity based cryptocurrencies like Monero and Zcash.
JVCEA aims to become the prime regulatory and exchange association in the Japanese market and they plan to provide guidance and recommendations to members and newcomers to comply with regulations and laws regarding virtual assets in the country. The other competent parties in the country, which have certainly not matured and come forward in such zeal as JVCEA, are the Japan Blockchain Association (JBA) and Japan Cryptocurrency Business Association (JCBA). With JVCEA’s application, it is expected that the Japanese market will grow further into the crypto trading paradigm and investors will look to gain more protection against scams and fraud investments while representative exchanges will have to take better guard against hacking and malfunction. Additionally, in the case of an attack, the crypto platform would have to put users’ interest first and protect them against any possible loss.