March 15, 2019

Japan will include cryptocurrency provisions in the Law on Financial Instruments and Exchanges

Japan’s Council of Ministers this Friday proposed a series of amendments to the Law on Financial Instruments and Exchanges and the Law on Financial Settlements, aimed at securing certain rules for regulating the cryptocurrency market, according to a local edition of the Nikkei.
The Law on Financial Instruments and Stock Exchanges is the main regulatory document in Japan that defines the principles for conducting transactions in the securities markets and the operating activities of related companies. It is aimed at ensuring the safety of investors and the transparency of the markets by establishing clear requirements for operations with securities and financial derivatives.

As the Nikkei notes, the updated version of the law will include several key points related to cryptocurrency. First, digital currencies will be placed in a separate category called “cryptographic assets,” which corresponds to the definition adopted by the G-20. Companies providing cryptocurrency exchange services will receive the status of "agents for the exchange of cryptographic assets."

The updated law will also require cryptocurrency exchanges to use “cold” wallets to keep their customers' funds. If for the storage of cryptocurrency they need to use infrastructure that has a permanent connection to the network, such assets should be provided with their own financial resources.

The margin trading of cryptocurrencies will be regulated in accordance with the same rules that apply to foreign exchange markets. In addition, cryptocurrency companies are not allowed to use promotional materials that encourage speculation and indulge in dishonest market practices, such as insider trading and price manipulation.

In mid-December, cryptocurrencies to the new legal category called “crypto assets” ranked the Financial Services Agency of Japan (FSA).