Japan Considers New Legislation for Cryptocurrency Intermediaries

Japan's New Legislation for Cryptocurrency Intermediaries

In a significant move towards regulating the cryptocurrency landscape, Japan is considering the introduction of lightweight legislation aimed at cryptocurrency intermediaries that do not operate as exchanges. The initiative, reported by Odaily, originates from discussions held by the Financial Services Agency (FSA) with the Financial System Council's Payment Services Working Group.

The Evolution of Cryptocurrency Legislation in Japan

Back in 2017, Japan established a legal framework for Crypto Asset Exchange Service Providers (CAESP). This legislation outlined the rules for entities engaged in buying and selling cryptocurrencies, acting as brokers, managing funds, and providing custody services. However, a gap has been identified where many introducers of cryptocurrency services, who do not operate exchanges, do not recognize themselves as CAESP.

The Proposed Regulations

The FSA's proposal seeks to address this regulatory gap by mandating that these introducers register as intermediaries. The proposed regulations would require these intermediaries to:

• Provide clear information to users regarding their services.
• Adhere to advertising restrictions that ensure transparency.
• Take on potential liability for damages that may arise from their operations.

Compensation and Liability Framework

Another critical aspect under discussion is the framework for handling damage compensation. Under current regulations, other financial service intermediaries that are not part of larger corporate groups are required to maintain a margin to cover potential damages. In situations where an intermediary is affiliated with a cryptocurrency exchange, the exchange is likely to bear the responsibility for compensating damages.

Conclusion

This move by the FSA reflects Japan's ongoing commitment to fostering a safe and regulated environment for cryptocurrency transactions. By requiring registration for intermediaries and establishing guidelines for liability and compensation, Japan aims to enhance consumer protection and maintain market integrity in the burgeoning crypto sector.