After Chinese regulatory authorities cracked down on Bitcoin trading in the country, Japan’s Financial Services Agency has announced that they will begin to closely monitor cryptocurrency exchanges.
Consequences Of China’s Ban
China’s decision to ban ICOs and Bitcoin Exchanges earlier this month resulted in the migration of many traders to Japanese and South Korean markets. This made Japan the world’s largest Bitcoin exchange market and proved the old adage ‘with great power comes great responsibility’ true. It makes sense for Japanese regulators to adopt a more cautious approach towards the world of cryptocurrencies as the country has been involved in its fair share of cryptocurrency frauds.
According to local reports, Japan had fallen victim to 33 cases of cryptocurrency fraud worth over a staggering $700,000 in the first seven months of 2017. Previously, in 2014, Mt. Gox had closed shop following 650,000 Bitcoins being stolen from customer accounts which prompted Japanese lawmakers to push for more stringent regulation of cryptocurrencies.
Japan has become the largest Bitcoin exchange market with 50.75 percent market share of the global Bitcoin exchange market.
— FPE GROUP 株式会社 (@FPE_Group_LTD) September 18, 2017
Bitcoin Exchanges Under Increased Scrutiny
Japan’s regulatory body, the Financial Services Agency (FSA), had established a surveillance team of 30 officials from the agency and local finance bureau last month. The FSA will assess whether these exchanges have appropriate internal systems, including ones to protect customer assets. The agency will even carry out on-site inspections if necessary.
An FSA executive said:
We pursue both market fostering and regulation enforcement. We aim for sound market development.
The 30 member team is in charge of analyzing whether these cryptocurrency exchanges properly manage customer assets separately from their own assets, as well as whether appropriate risk management measures are set up in place to ensure safety in case of cyber attacks, among others. Consequently, all Japanese exchanges are now required to register with authorities before October under the revised payment services law that went into effect in April.
What This Means for the Crypto Community
While it may seem to some that this increased scrutiny of cryptocurrency exchanges comes as bad news for the crypto-community, the truth is far more complex. China’s crackdown on Bitcoin may have temporarily led to a correction in its price, but Bitcoin has rallied since and now hovers close to the $4000 mark. This goes to show that no matter how large one country is, it cannot sink the cryptocurrency.
The abuse of ICOs by fraudsters has been rampant ever since this novel way of fund-raising became a rage, and measures need to be put in place to safeguard against such abuse. Not only will close monitoring of exchanges help against abuse, but they will also help reduce price volatility. Bitcoin itself has alternated four or five times this year from soaring to all-time highs to plummeting for sharp corrections. The next stage of Bitcoin’s growth needs to see an increase in its adoption; some stability would go a long way in assuaging fears regarding this new financial technology.
Bitcoin's volatility is because billions of dollars equivalent is traded each day by people chasing FIAT profits.
— The Sirius Report (@thesiriusreport) September 15, 2017