Crypto Market Regulation in Asia
In Asia, the main centres of the crypto market are Japan, Hong Kong and Singapore.
Japan established itself early on as one of the main hubs for exchanges in the crypto market. This great rise of the nation was aided by the fact that in 2017, the Chinese government closed some exchanges in cryptocurrency trading. It is also one of the first nations to introduce regulation in this context, not so much as a matter of ambition but mainly due to a series of regulatory constraints that had been created internationally and which it had to sign up to. Lately, Japan, also from a political point of view, has been advocating the need for increasingly stringent regulation of this market, which still lacks well-defined rules.
Hong Kong, the city that in the past hosted Bitmain and the now defunct FTX, was home to the biggest names in the crypto market until its Securities and Futures Commission (SFC) began examining token listings. Against this backdrop, regulation began to stifle companies to the point where they fled and found other, more challenging realities.
Generally, it is Singapore that is the most attractive to the market, as Japan imposes taxes on token-issuing companies and even Hong Kong has started to be less welcoming since the spectre of regulation has spread.
An Historical Brief
In 2017, Japan passed a law recognizing cryptocurrencies as legal tender and acknowledging cryptocurrency exchanges as legal entities. This law mandates that exchanges must register with the Japanese Financial Services Agency and abide by anti-money laundering and know-your-customer regulations.
In response to this, the Japan Virtual Currency Exchange Association (JVCEA) was formed to create better practices and standards within the industry. Furthermore, the Bank of Japan is exploring the possibility of issuing a digital Yen. As a result, research is being done to understand the technology and legal framework for such a project.
Japan has always been an early adopter of cryptocurrency, having suffered from the Mt. Gox and Coincheck hacks in 2014 and 2018 respectively. Despite these setbacks, Japan has not been deterred, and instead has continued to strive towards becoming a leader in the field, taking proactive steps to ensure the safety of crypto assets.
The Liberal Democratic Party’s Web3 Project Team is also taking a forward-thinking approach, seeing cryptos as an opportunity instead of a crisis.
In addition, Japanese exchanges are finding it easier to list tokens and regulatory requirements have been revised to benefit crypto entrepreneurs. The Japanese government has also mandated the separation of customer and exchange assets, with most exchange assets stored in cold wallets. This has proved effective when FTX experienced issues, with Masaaki Taira, a member of Japan’s House of Representatives, stating that the FTX crash had no influence on decision-making.
This shows that Japan is not afraid to take risks and innovate in the cryptocurrency space. Despite the numerous challenges it has faced, Japan remains a leader in the industry, demonstrating an ability to learn from its mistakes and adopt new regulations that enable it to remain ahead of the curve. It is clear that Japan will continue to be a key player in the cryptocurrency industry in the future.
What about the Digital Yen?
The digital Yen is a proposed form of digital currency that would be issued by the Bank of Japan. It would be a digital version of the Japanese yen, the official currency of Japan. The digital Yen would be a central bank digital currency (CBDC) that would allow users to store and transfer funds directly between their bank accounts without having to go through a third-party financial institution. The Bank of Japan is currently exploring the possibility of issuing a digital Yen and is conducting research on the technology and legal framework for such a project.
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