Japanese Regulator Publishes Proposed Rules for Cryptocurrency Service Providers

Japanese Regulator Publishes Proposed Rules for Cryptocurrency Service Providers

Japan’s top financial regulator has published the final report outlining proposed rules for cryptocurrency service providers to follow. The rules address areas such as hacking incidents, coin listings, financial and price disclosures, margin trading, and crypto custodial services.

Final Report of Proposed Rules

An FSA spokesperson told news.Bitcoin.com on Wednesday:

The requirements cover areas such as risks relating to thefts of customers’ cryptocurrencies when hacking incidents occur, price fluctuations and speculation. The lack of internal control systems amid rapid business expansion of service providers was discussed, along with measures for crypto transaction types such as margin trading that are not covered by existing regulations.

Rules on Crypto Exchange Operations

The report specifies nine areas that need to be addressed relating to the operations of crypto exchanges and service providers. The first proposed rule reads:

Secondly, they must “Develop [a] framework to entitle customers to [a] statutory lien that secures their claim to deposited virtual currency.” They must also disclose their financial statements.

Furthermore, crypto service providers are prohibited “from dealing in virtual currencies that could impede user protection or proper and reliable business operations,” the report reads. The last requirement under this category is for them to notify the FSA “each change of a line of virtual currencies in advance.”

Rules on Margin Trading

Secondly, a limit will be imposed on each cryptocurrency’s leverage ratio “based on [the] actual virtual currency price fluctuations.”

Service providers will also be required to explain the risks specific to cryptocurrencies and set minimum margin amounts. Lastly, crypto credit will follow similar rules as margin trading since they have similar functions and risks, the report details.

Additional Rules

Cryptocurrency custodial services will also be regulated. Specifically, the same regulations that currently apply to crypto exchanges will apply to the custody of customers’ cryptocurrencies. Furthermore, the report notes:

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