The financial regulators of Japan are moving forward in order to create a system to register and control domestic digital currency exchanges.
The Japan Times has published an article in which it reported that a group beneath the Financial Services Agency’s Financial System Council will finalize a draft text which it is finished, will be submitted to the legislature of the country, the Diet, next year.
The article in Japan Times stated, “The draft proses conditions that virtual currency exchange operators should meet, such as maintaining a certain amount of capital and requiring them to manage customer assets separately from their corporate assets.
In addition, calls for mandatory checks on exchange operators by certifies public accountant or auditing firms. These would inspect how the operator are handling their assets and verify their financial statements.”
Some of the speculated regulations and considerations are:
Bringing registered crypto currency exchanges under Japan’s anti- money laundering laws.
Mandating exchange operators meet certain pre- set financial condition such as having a minimum amount of capital.
Another stipulation may include requiring operators manage customer assets separately from corporate assets. This would also help with clarity in the case of bankruptcy.
Mandatory external checks from certified public accountants or auditing firms that exchange operators will have to undergo.
Exchange operators will also be obliged to confirm their clients’ identities when opening new accounts.
Operators will also be obliged to report questionable trading patterns to authorities.
Transaction records will have to be maintained and stored by operators.
Operators will also be responsible for security measures and the computer systems requires to protect their users’ information.
The draft proposes a suggestion that a 2007 law which is called Act on Prevention of Transfer of Criminal Proceeds be applied to the domestic exchanges.
By doing so, the exchanges in Japan would be required to collect and maintain data on customers, and provide information regarding suspicious activity to the Japanese authorities.
The collapse of the Tokyo- based exchanged, Mt Gox and also the arrest of its chief executive officer, Mark Karpeles on suspicion of stealing $1 million from the online platform has also been mentioned in the document.
According to the draft, the working group is seeking ways in which the regulation can be crafted so as to not overburden the startups that is working in an emerging industry.
It also suggests that self- regulation should be encouraged among other exchanges, calling for creation of a body to promise that effort.