Japanese laws on cryptocurrency - PSA and FIEA change

Endy Callahan

New regulations for virtual assets will commence in a week.

Revised Digital Laws will be applied in May.

Novel bylaws for regulating the digital assets circulation will come into force the following month. The pair of the fragments of legislation on (PSA) with the law on (FIEA), issued last year by Japanese HR on cryptocurrency were planned to come into force from April this year.

Nevertheless, due to erratic postponements, the due date was officially rescheduled. The sanctioned government-based source publicized that the renewed versions of laws would be commenced starting on 1 May.

The authorities also intend to establish control over derivatives trading, eliminate the risks associated with hacking exchanges, and make the regulation of the industry more transparent. 

Alterations to Payment Services Act

Because Japan has not yet adopted laws regulating virtual assets, amendments to current rules are the single way for crypto assets to get any legal status on the Asian side. The proposed amendments to the PSA relate to the basic terminology: the term “crypto-asset” has replaced the phrase “digital currency,” plus stricter requirements for storing digital commodities. Besides, since 1 May, virtual exchanges functioning in the state are obliged to manage clients ' reserves independently of users’ finances flows.

This involves using a third-party operative to store customers' funds and control “reliable means” such as “cold e-wallets.” If consumers insist on utilizing “hot wallets", the stocks promise to have "the same number of digital assets" in their distribution as users,  to compensate for quests in case of a loss.

This is a type of reaction to Mt. Gox hack, during which BTC tokens amounting 850,000  were stolen.

Changes to the FIEA

The alterations to FIEA affect the notion of (ERTR), which stands for electronically recorded transferable rights, that is connected with the offer of security tokens (STO) along with the bylaw of the initial coin offering (ICO). ERTRs are tokens issued for profit. Besides, the country has virtually no regulation of digital assets, 80% of participating transactions are unregulated.

Starting May 1, operations with cryptocurrency derivatives will be managed by FIEA. Also, the FIEA strongly forbids the spread of gossip on the implementation of falsified schemes for the profit means sale and purchase or engagement in any transaction of tokens or derivatives. Lately a law firm from Tokyo issued a statement that the controlling procedures provided by  PSA with FIEA regulations have facilitated in making Japan a high profile, as a safe haven for virtual currencies, uprooting all manifestations of the wild west.

Where will the new regulations lead?

To remind, the fact that digital money should be called “cryptocurrency assets,” was earlier reported by Japanese Finance Minister Taro Aso, in late April. The official stressed that blockchain is a promising technology, but not everyone will use it for good. Therefore, it is necessary to monitor companies and check whether they comply with the requirements of the law.

To sum up, all the new measures mentioned above are aimed at strengthening control of the digital money market to increase consumer protection, to eliminate the risks associated with hacking exchanges and make the industry's regulation more transparent. Prospects seem promising; however, ultimately time will show the outcomes of the novel regulation.