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The top Japanese regulator, the Financial Services Agency (FSA), appears set to approve reforms to the way the country polices stablecoins and crypto brokerage businesses.
In an interview with Cryptonews’ Rachel Wolfson at Consensus 2024, Seyffart discussed the timeline and approval process for spot ETH ETFs, including the 19b-4 rule change and the role of the SEC.
The VASP application process is long, technically (and financially) demanding, and extremely rigorous. However, critics claim that brokerages should not need full VASP permits, as they are mere “intermediaries,” and do not actually hold their clients’ crypto.
Currently, Japanese crypto brokerages need to apply for the same type of virtual asset service provider (VASP) licenses as domestic crypto exchanges.
This would mean that brokerages could expect new “streamlined” regulatory requirements and anti-money laundering protocols.
The working group’s proposals reflect these criticisms. It proposes the creation of “a new category” of “intermediary” crypto “businesses.”
The body recommended “an upper limit of 50%” on the amount of bonds and fixed-term deposits stablecoin issuers could use as collateral.
The working group also made stablecoin-related policy recommendations. It suggested that the FSA accept “short-term government bonds and certain fixed-term deposits” as collateral, in addition to conventional fiat deposits.
This, the working group said, would help issuers “strike a balance between enhanced convenience and safety.”
The move could potentially allow stablecoin issuers more flexibility when “managing their funds across multiple financial products.” However, the body added that regulators may need “further mechanisms” to provide “adequate” guarantees for “user protection.”
FTX Japan customers were forced to wait two years to withdraw their funds after the platform’s operator FTX declared bankruptcy in November 2022.
It said that “taking lessons from the collapse of FTX in 2022,” regulators should launch “mechanisms” that “prevent domestic users’ cryptoassets from being transferred overseas, even if an overseas parent company goes bankrupt.”
The working group has been discussing policy reform since August 2024. It was ordered to review regulations not only pertaining to crypto and stablecoins, but also to other “remittance and payment services.”
The FSA is now expected to formulate an official request for legal amendments to two key payment-related laws, the Trust Business Act and the Payment Services Act.
The Japanese Finance Minister Katsunobu Kato recently spoke of “creating an environment” where citizens can “use highly convenient remittance and settlement services, while enjoying peace of mind.”
Japanese law currently classifies cryptoassets as digital payment tools. But Tokyo wants to change this, and reclassify Bitcoin (BTC) and other coins as investment-related assets.