Japan's Financial Services Agency is reportedly considering possible revision of the regulation for cryptocurrency exchange operations.
According to the local media, the regulator may apply the Financial Instruments and Exchange Act (FIEA) to the cryptocurrencies. At the same time, this segment is regulated by the Payment Services Act. In case of a positive determination, with the new regulation, the exchanges will have to provide better protection of their clients. Moreover, under FIEA financial companies will have to control funds and securities of their clients separately from corporate assets.
For now, the effective legislation covers provides that cryptocurrencies are legally considered as the same means of payment as e-money. At the same time, if the regulator switches to FEIA regulation, cryptocurrencies will become financial products. In addition, the new rules may allow crypto derivatives, like ETF.
FSA has started considering revision of the current regulation following the hack of Coincheck this January. As a result, the exchange lost more than NEM coins worth $500 million and the regulator launched an inspection of 15 unregistered platforms. During the investigation, it was detected a number of weaknesses and gaps in the protection and transactions control.