Japan is the biggest market for Bitcoin, and it has the most progressive regulatory environment for cryptocurrencies.
It was the first country to adopt a national system to regulate cryptocurrency exchanges. Since 2017, it recognises several digital currencies as legal property and means of payment.
The Japanese government has been working on cryptocurrency regulation since 2014, after the collapse of the Japanese exchange Mt.Gox. This was the biggest heist in the history of cryptocurrency, as it alleged the theft of around 850,000 Bitcoin, and it was a spur to immediately start to develop new regulations for cryptocurrency. A special study group and a working group were immediately established in the Financial Services Agency (FSA) to work on the draft of the Payment Services Act.
The final draft of the Payment Services Act was approved and implemented by the Financial Services Agency (FSA) in April, 2017. The Law regulates AML requirements and registration process for exchanges, allowing business and companies grasp on how to deal with digital assets in the country.
Cryptocurrency exchanges in Japan are required to register with the FSA in order to operate – a process which can take at least six months, with no deadline of whether or when the approval will be issued. According to the FSA, around 190 firms are currently waiting for approval to start operating in the country. Some of them are currently waiting for the approval to be issued, but some others decided to withdraw the application and are instead looking for other market opportunities by creating companies abroad.
The FSA keeps working to improve the regulation every day, and just on March 20th , it has approved draft amendments related to cryptocurrency margin trading. The amendment will limit the leverage in margin trading at two to four times the initial deposit.
Japan has always been friendly towards cryptocurrencies, but AML concerns are pointing out, that the FSA might consider further regulatory steps. As the FSA representative previously said, it’s aim is to “let the cryptocurrency industry grow under appropriate regulation’ in order to find the ‘balance’ between consumer protection and technological innovation.”