Japan's financial regulators are preparing to shift oversight of crypto assets from the country's payments system to a framework designed for investment and securities markets.
The Financial Services Agency (FSA) on Wednesday released a comprehensive report from the Financial System Council Working Group on the regulatory status of cryptocurrencies across multiple sectors.
The document outlines a plan to shift the legal basis for crypto regulation from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA), the first law regulating securities markets, issuances, trading and disclosures.
“Crypto assets are increasingly getting used as investment targets domestically and internationally,” the report says, underscoring the necessity to protect users through regulation that treats crypto as a financial product.
Tightening data disclosure regulations
One of the important thing changes led to by the inclusion of cryptocurrencies inside the scope of FIEA regulation is the tightening of knowledge disclosure requirements for initial exchange offerings (IEOs) or token sales managed by cryptocurrency exchanges.
“User-conducted crypto transactions are just like securities transactions and should involve the sale of latest crypto assets or the acquisition and sale of cryptocurrencies already in circulation,” the document says, underscoring the importance of timely information in IEO sales.
Source: FSA Japan
Among the necessities for IEOs is the proposal that exchanges must provide pre-sale disclosures, including detailed information in regards to the core entities behind the offering. It also requires code reviews by independent external experts and encourages consideration of feedback from self-regulatory organizations.
In addition to exchanges, it places responsibility on issuers and requires them to reveal their identity, no matter whether the project is decentralized and the way tokens are issued and distributed.
The proposed framework would also give regulators stronger tools to crack down on unregistered platforms, particularly those operating abroad or tied to decentralized exchanges. It also incorporates explicit prohibitions on insider trading, reflecting the provisions of the European Union's Markets in Crypto-Assets Framework (MiCA) and South Korean regulations.
The news got here because the Japanese government was considering plans to lower the utmost tax rate on crypto profits by imposing a flat rate of 20% on all crypto trading profits.
On Tuesday, the FSA also signaled a cautious stance on allowing derivatives for exchange-traded funds with foreign crypto assets, reportedly describing the underlying assets as “undesirable.”
