The highly acclaimed legal firm of Nagashima Ohno and Tsunematsu released a commentary on a proposed Japanese FSA bill this week. The bill was first proposed by the Japanese Financial Services Agency (FSA) on March 15, 2019. If passed, it would make a final distinction between security tokens and other forms of cryptocurrency. Consequently, Japanese STOs would see increased regulations.
The law firm Nagashima Ohno and Tsunematsu decided to make life easier on the crypto world when they published their insightful commentary on the new FSA bill. To better understand the proposed changes, you first need a brief rundown on the current legal status of crypto in Japan.
Currently, all forms of cryptocurrency in Japan fall under the Payment Services Act (PSA). The PSA is very broad in its description of crypto. In fact, it labels all crypto “virtual currencies.” Analysts noted that this high level of ambiguity slowed mainstream adoption in the country as major investment firms need clear regulations.
So What’s in the FSA Bill?
According to Nagashima Ohno and Tsunematsu, the proposed bill points out numerous areas in need of clarification. The first issue addressed by the bill is the use of the term “virtual currencies.” The FSA wants the term removed and replaced with “crypto assets”. This distinction is important when you consider that most cryptocurrencies are not used at currency at all.
Also in the new bill, crypto assets will be, for the first time in Japan, different than tokenized securities. Consequently, the FIEA will have the power to determine which category an ICO falls under. Additionally, all exchanges operating in the country must register for licensing as a “Crypto Asset Exchange Service Provider.”
FSA Customer Safety
Consumer protections in the bill include requiring the use of “cold wallets” by exchanges holding user’s crypto when not in use. Also, businesses would need to provide a plethora of background and management information to the FIEA before embarking on a blockchain-based crowdfunding venture.
Another important aspect of the FSA bill is an increase in penalties for false advertising and soliciting. This proposition falls in line with the SEC, who, recently filed charges against the Rapper the Game and a Former Beauty queen for promoting the Paragon ICO.
All exchanges operating in Japan would need to adhere to strict KYC and AML regulations if the bill becomes law. The requirements would make anonymous exchanges a thing of the past in Japan. This could be a move that may be difficult to achieve from a technical aspect when you consider the ever-growing number of decentralized exchanges emerging.
Asian Exchange Licensing in the Past
The Exchange Licensing area of the bill could see some backlash from the Asian cryptocommunity as the licensing requirements were not included. This type of vagueness is reminiscent of when China initially shut down its exchanges in 2017. Luckily, Japan is pro-crypto, so the chances of this happening in the Land of the Rising Sun are slim to none.
Nagashima Ohno and Tsunematsu
The firm of Nagashima Ohno and Tsunematsu is a multinational law firm that offers premier legal services to those seeking to do business in Japan. The firm has offices in New York, Tokyo, Singapore, and Bangkok. Notably, Nagashima Ohno and Tsunematsu are one of the “Big Four” Japanese law firms in the country.
Japan continues to see increased STO activity with one report placing 2019 Q1 growth up 130-percent. Both investors and traditional investment firms desire updated regulations that include terminology relevant to the crypto space. This latest bill is an attempt to alleviate some of these concerns.
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