Japan has reportedly urged other countries, including the United States, to regulate crypto exchanges like they do with banks. A senior Financial Services Agency official explained that FTX’s recent implosion was not caused by crypto technology but by “loose governance, lax internal controls and lack of regulation and oversight.”
Bank-level cryptocurrency regulations
Japan’s Financial Services Agency (FSA), the country’s top financial regulator, has urged regulators around the world to subject cryptocurrency exchanges to bank-level regulations, Bloomberg reported on Monday. Mamoru Yanase, Deputy Director General of the FSA’s Strategy Development and Management Office, is quoted as saying:
If you want to implement effective regulation, you must do the same as you regulate and supervise traditional institutions.
The FSA has called for tougher crypto regulation following the collapse of crypto exchange FTX and subsequent fraud charges filed against its former CEO Sam Bankman-Fried (SBF). The collapse of FTX dealt a severe blow to the cryptocurrency industry, highlighting regulatory gaps and differences around the world.
Japan’s strict regulatory framework for crypto assets has provided a measure of protection for local investors, as they should be able to withdraw their funds next month from two Japanese crypto exchanges linked to FTX.
Commenting on the failure of FTX, Yanase said:
What caused the latest scandal was not the crypto technology itself… It was loose governance, lax internal controls, and the lack of regulation and oversight.
According to Yanase, the FSA has “begun to urge” its counterparts in the United States, Europe and other regions to subject cryptocurrency exchanges to the same level of oversight as traditional financial institutions, such as banks and merchants. brokerage houses, are subject.
Noting that countries might need to establish a multinational resolution mechanism to coordinate when large crypto firms fail, Yanase stressed the importance of ensuring consistency in regulations around the world.
The FSA official stressed that countries “must strongly demand” measures from crypto exchanges to ensure consumer protection, combat money laundering and implement governance, internal controls, audits and disclosures solid. He added that regulators should also have the power to take enforcement action, such as on-site inspections, to ensure crypto firms are handling client assets properly.
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